It has been reported that the Hong Kong Financial Secretary's Office and the Financial Services and the Treasury Bureau recently jointly released a public consultation document seeking public opinions on legislative proposals for regulating stablecoin issuers. The purpose of this initiative is to standardize the virtual asset trading market, ensure compliant issuance and use of stablecoins, and safeguard investor rights. Here are some key contents and related comments from the public consultation document.
Firstly, the public consultation document suggests introducing new legislation to implement a licensing system, requiring all eligible foreign stablecoin issuers to obtain a license issued by the Commissioner of Financial Services. This is aimed at strengthening the regulation of stablecoin issuers to ensure their compliant operations and risk control. At the same time, it stipulates that only designated licensed institutions can provide services to purchase foreign stablecoins, and only stablecoin issuers with licenses can sell foreign stablecoins to retail investors, maintaining investor interests and market stability.
Secondly, the Financial Services and the Treasury Bureau will introduce a "sandbox" mechanism to convey regulatory expectations to issuers intending to issue foreign stablecoins in Hong Kong, providing compliance guidance and collecting their opinions on proposed regulatory requirements. This measure aims to facilitate the implementation of subsequent regulatory frameworks, ensuring that they align with regulatory goals and providing clearer guidance and standards for market participants.
In response to the policy proposals in the public consultation document, Hong Kong Legislative Council member Wu Jiezhuang emphasized that the international virtual asset trading market has developed for many years, with various stablecoins available. He stressed that if international stablecoin companies do not apply for licenses in Hong Kong within the specified period, regulatory authorities need to consider how to allow trading of such international stablecoins on licensed exchanges in Hong Kong and how to align with international standards to avoid negative impacts on the overall operation and trading volume of the virtual asset market. He also called for regulatory authorities to specify practical use cases for stablecoins to meet citizens' needs in physical and daily transactions.
Additionally, there are reports indicating that Guo Yanlin, co-founder of virtual insurer OneDegree, stated that over the past few months, the company has received interest from over 100 project teams in developing stablecoins. These teams have proposed various application scenarios, including payments, cross-border trade financing, equity and debt capital markets, decentralized finance (DeFi), and GameFi (Game Finance). Some project teams have also expressed interest in stablecoins and applying for a license as a Virtual Asset Service Provider (VASP) in Hong Kong. He believes that stablecoins are crucial for the development of Web3, attracting mainstream investors into the Web3 and cryptocurrency ecosystem.
According to the stablecoin consultation document released by the Hong Kong Financial Services and the Treasury Bureau, issuing stablecoins in Hong Kong without permission and advertising to promote stablecoins from unlicensed issuers are both considered criminal offenses. The document suggests that the regulatory framework should introduce a range of civil and regulatory sanctions. The Financial Services and the Treasury Bureau may consider implementing appropriate penalties, including temporary or permanent license revocation, fines, etc., based on the severity and duration of the violations.
In summary, the joint release of the public consultation document by the Hong Kong Financial Secretary's Office and the Financial Services and the Treasury Bureau has put forth specific regulatory proposals for stablecoin issuers. The aim is to standardize the virtual asset trading market, protect investor rights, and promote the healthy development of the market. This initiative has garnered widespread attention and discussion from relevant industries and investors. During the upcoming consultation period, various stakeholders will actively participate in discussions, collectively advancing the healthy development of the virtual asset trading market and the refinement of regulatory frameworks.
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