The public consultation, which concluded in February 2024 received 108 submissions from various stakeholders including market participants, industry associations, and professional organisations. The majority of respondents expressed support for introducing a regulatory regime for FRS issuers to manage potential monetary and financial stability risks, and to establish transparent guidelines.
Mr. Christopher Hui, Secretary for Financial Services and the Treasury, highlighted the proposed licencing regime for FRS issuers as a step to improve Hong Kong’s virtual assets regulatory framework in alignment with international standards. He emphasised the regime’s role in mitigating financial stability risks associated with FRS issuance activities.
In turn, representatives from the HKMA acknowledged the positive feedback received and underscored the importance of a well-regulated environment for the sustainable development of the stablecoin ecosystem in Hong Kong.
Moving forward, the FSTB and HKMA will incorporate stakeholders’ feedback to finalise the legislative proposal for implementing the regulatory regime. They aim to introduce the bill to the Legislative Council expeditiously. Additionally, the HKMA is progressing with the stablecoin issuer sandbox applications, with participants to be announced in the near future.
The sandbox arrangement
Stablecoins are virtual assets designed to maintain a stable value relative to certain assets, typically currencies. Recognising the increasing integration of traditional financial systems with virtual asset markets, the Hong Kong Monetary Authority is developing a regulatory framework for stablecoin issuers in Hong Kong. To facilitate this, the HKMA has introduced a sandbox arrangement aimed at encouraging dialogue between the regulator and industry stakeholders regarding the proposed regulatory requirements.
Through the sandbox arrangement, the HKMA aims to communicate its supervisory expectations and provide compliance guidance to entities interested in issuing fiat-referenced stablecoins in Hong Kong. Additionally, the arrangement allows the HKMA to ask for feedback from stakeholders on the proposed regulatory framework.
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