The Hong Kong government published the ‘Stablecoin Bill’ in the Official Gazette on December 6 to introduce a regulatory system for fiat currency stablecoin issuers in Hong Kong. The bill is scheduled to be submitted to the Legislative Council for first reading on December 18.
The draft bill seeks to strengthen the regulatory framework for cryptocurrency activities to address potential risks associated with fiat stablecoins. The bill also aims to promote financial stability, ensure sufficient protection for users and leverage the benefits that “virtual assets” and related technologies can bring.
According to local media reports, the licensing system mentioned in the bill proposes that individuals/entities carrying out the following activities must first obtain a license from the Monetary Authority:
(i) In the course of our business, we issue fiat stablecoins in Hong Kong.
(ii) issue the claimed anchor in the course of its business;
(iii) Actively encourage the issuance of fiat stable currency to the Hong Kong public.
The bill also aims to provide the Monetary Authority with the supervisory, investigative and enforcement powers necessary to establish an effective regulatory system.
Commenting on the gazetted bill, Financial Services Minister Hui Ching-yu said: “This legislative proposal is critical to meeting Hong Kong’s obligations as a member of the Financial Stability Board. Legislative proposals that adhere to the ‘same activity, same risk, same supervision’ principle have a risk-based focus. We are committed to creating a sound regulatory environment and consistent with Hong Kong’s regulatory approach to virtual assets.”
Meanwhile, Yu Weiman, the Commissioner of the Monetary Authority, insisted that the regulator believes in sound policies that can foster the sustainability of Hong Kong’s responsible stablecoin ecosystem. Weiman added that these proposals were made after thorough consultation and that industry input was fully taken into account when determining the details of the regulatory system.
Creating a stablecoin regulatory framework is Hong Kong’s latest attempt to create a cryptocurrency-friendly environment that has the potential to compete with other Asian countries such as Singapore. In fact, the Hong Kong government recently announced plans to exempt hedge funds, private equity funds, and family offices from capital gains tax on digital assets, including Bitcoin and other cryptocurrencies, with the same intention.
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