Hong Kong’s central bank has issued an invitation to worldwide stablecoin operators to comment on its proposed policies.
The Hong Kong Monetary Authority (HKMA), Hong Kong’s central bank, aims to oversee stablecoin supply and reserves management.
On January 12, the HKMA issued a discussion paper on cryptocurrencies and stablecoins, outlining its thoughts on how the market should be governed in Hong Kong.
The HKMA focused on “payment-related stablecoins” in the 34-page consultation document, noting that the market valuation of all stablecoins reached $150 billion in December, representing for 5% of the total crypto market. The regulator also stated that all existing stablecoins are “primarily asset-linked and predominantly pegged” to the US dollar, including Tether (USDT) and USD Coin (USDC).
“The rapid development of crypto-assets, particularly stablecoins, is a topic of keen attention in the international regulatory community as it presents possible risks regarding monetary and financial stability,” HKMA said.
To effectively manage associated risks, the HKMA proposed eight important policy directions, including the creation of a single regulator to oversee organisations involved in both regulating and conducting operations such as producing stablecoins and managing their reserves. The authority also intends to control the validation processes of stablecoin transactions, as well as the administration of private keys and the execution of transactions.
“We encourage current or prospective players in the stablecoins ecosystem to respond to this paper and submit relevant views to us, so that we could take the feedback into account when formulating the regulatory framework,” HKMA wrote. The agency intends to complete its next steps as quickly as feasible and to implement new regulations by 2023 or 2024.
The HKMA is not the only financial authority concerned about stablecoin dangers and preparing to oversee the burgeoning business. The United States President’s Working Group on Financial Markets produced a study in November 2021 on potential “stablecoin runs” and “payment system threats.” In December, the US Treasury hinted at new stablecoin-focused legislation.
