Hong Kong’s central bank, the Hong Kong Monetary Authority (HKMA), wants to oversee stablecoin issuance and reserve management.
HKMA post A Jan. 12 discussion paper on cryptocurrencies and stablecoins, which provides input on how Hong Kong should regulate the industry.
In a 34-page consultation DocumentationThe MAS paid particular attention to “payment-related stablecoins,” noting that the market capitalization of all stablecoins reached $150 billion in December, accounting for 5 percent of the entire crypto market. The regulator added that all existing stablecoins are “primarily pegged to assets, primarily U.S. dollars,” including stablecoins like Tether (USDT) and dollar coins (USD/USD).
“The rapid development of cryptoassets, especially stablecoins, is a topic of high concern to the international regulatory community, as it may pose risks to monetary and financial stability,” the HKMA said.
To effectively address related risks, the HKMA has formulated eight major policy directions, proposing to become a single regulator to supervise entities involved in regulatory and operational businesses such as issuing stablecoins and managing reserves. The agency also wants to regulate the verification process for stablecoin transactions, private key storage management, and execution of transactions.
“We encourage existing or potential participants in the stablecoin ecosystem to respond to this article and submit relevant comments to us so that we can take the feedback into account as we develop our regulatory framework,” the MAS wrote. The regulator expects to do so soon Next steps and new regulations in 2023 or 2024.
The MAS is not the only financial regulator concerned about stablecoin risks and plans to regulate the evolving industry. November 2021, U.S. President’s Working Group on Financial Markets Published a report on a possible “stablecoin run” and “payment system risk”.The U.S. Treasury then Hints of new stablecoin-focused law in December.