Hong Kong begins discussions on introducing stablecoin regulatory framework

The Hong Kong Monetary Authority (HKMA), Hong Kong’s central banking institution, has released a questionnaire to assess public perceptions of regulation of crypto assets and stablecoins. The state-backed regulator intends to have a regulatory framework in place by 2023-24.

The HKMA’s Discussion Paper on Cryptoassets and Stablecoins highlights the explosive growth of the stablecoin market in terms of market capitalization since 2020, as well as including the U.S. Financial Action Task Force (FATF), U.S. Financial Action Task Force (FATF) ), the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS).

Market capitalization of cryptoassets.Source: HKMA

according to For the MAS, from a systemic perspective, the current size and trading activity of cryptoassets may not pose an immediate threat to the stability of the global financial system. However, the discussion paper warns:

“Institutional investors are increasingly exposed to such assets as alternatives or complements to traditional asset classes for trading, lending and borrowing […] Indicates growing ties to the mainstream financial system. “

Market capitalization of major stablecoins. Source: HKMA.

According to the chart above, the MAS document shows that the global market capitalization in December 2021 is about $150 billion, “about 5% of the entire crypto asset market.” The regulator also shared a checklist of eight questions to seek policy-relevant advice and listed five possible regulatory outcomes – no action, opt-in regime, risk-based regime, catch-all regime and blanket ban:

Possible policy options for regulating cryptoassets. Source: HKMA.

HKMA expects stakeholders submit They have until 31 March 2022 to respond, with the aim of “introducing a new regime no later than 2023/24”.

Regulatory stances on stablecoins in major jurisdictions. Source: HKMA.

Finally, regulators say that payment-related stablecoins are more likely to be incorporated into the mainstream financial system and even in day-to-day business and economic activities.

As such, the MAS is considering expanding the scope of the Payment Systems and Stored Value Facilities Ordinance (PSSVFO), a law that determines the legality of financial products.

related: Hong Kong real estate giant leads $90 million round in crypto bank Sygnum

In line with the local government’s intention to support cryptocurrencies, Sun Hung Kai, one of Hong Kong’s largest real estate developers, invested $90 million in Sygnum, a Swiss bank dedicated to digital asset holdings.

As Cointelegraph reported, the Series B round brings Sygnum’s post-money valuation to $800 million, marking a tenfold increase in consolidated revenue from 2021.