Hong Kong’s focusing on its regulations of stable coins!

 

The regulation of stable coins in Hong kong is gonna be a heavy headache for the foreign coins who have already regulated themselves according to the SEC and other commissions and boards. 

The Hong Kong monetary authority (HKMA) , similar to the Security exchange commission (SEC) in the USA , has clearly said that for a stable coin to operate in Hong Kong must abide by the rules and regulations which are about to be published as soon as this year . 

HKMA

The Hong Kong Monetary Authority is Hong Kong’s central banking institution. It is a government authority founded on 1 April 1993 when the Office of the Exchange Fund and the Office of the Commissioner of Banking merged. The organization reports directly to the Financial Secretary.

Regulations in stable coins may come out sooner or later this year in Hong Kong. 

The HKMA’s current need is that stablecoins must be fully backed by high-quality liquid assets (which HKMA has yet to detail) and be redeemable to their referenced fiat currencies at par. Under this regime, algorithmic and arbitrage coins are effectively not allowed.

The downfall of FTX , Terraform lapse and its arbitrary UST stable coin have alerted the crypto world in the regulations of stable coins too. 

Now this retime which the HKMA will produce soon will contain all the specifications needed for the stable coins to operate within Hong Kong’s territory. 

Ultimately this adds on a license which the issuer must possess. 

A representative from the HKMA said that “regulatory treatment for different types of virtual assets would depend on, among other things, their actual structures and operational details.”

Issuers of widely used stablecoins like tether (USDT) might have to set up a locally incorporated entity.

How active is HKMA? 

Currently HKMA is focussed on improving the financial stability of Hong Kong but at the same time they are hound to raise the economy. And so the city is trying to welcome talents and new firms to keep its international relations. 

Complications

Requiring foreign entities that have already issued stablecoins to set up an entity in Hong Kong then issue stablecoins out of that entity would create complications.

And this stance of HKMA to register with the Hong Kong entities even if they are a foreign entity is not an industry friendly policy. 

Legally, investors holding stablecoins issued from the Hong Kong entity would only be able to go after that entity, not its other entities. 

Conclusion

Byun, global government relations officer at OKX said.”To quickly just move the entire crypto industry into the traditional securities world is like pushing a square peg into a round hole”.

Which is completely agreeable…but practically this emotional statement must be ignored , because we humans have proved that we need these kinds of complicated rules and regulations to control our greedy nature from the past and for sure in the future. 

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