Hong Kong's Stablecoin Law will take effect in August, aiming for limited licensing and strict regulations on anti-money laundering.
Mr. Xu Zhengyu – Director of the Hong Kong Treasury Bureau – stated that HKMA is seeking market opinions to refine the law implementation guidelines, expected to be announced this month.
MAIN CONTENT
Hong Kong's Stablecoin Law will take effect from August 2024.
The main regulation focuses on anti-money laundering and limited licensing (single-digit units).
The Central Bank will discuss the issuance of stablecoins related to international currencies.
When will the cryptocurrency price stabilization law in Hong Kong be applied?
According to information from the Director of the Hong Kong Treasury Bureau – Xu Zhengyu – the Stablecoin Law will officially take effect from August 2024. In the meantime, HKMA (Hong Kong Monetary Authority) is conducting market consultations to develop detailed guidelines, ensuring completeness and feasibility of the regulations.
The issuance of official guidelines is expected to take place in July, enabling organizations and businesses to timely prepare for the licensing and compliance process.
What are the main requirements for stablecoin licensing?
Mr. Xu Zhengyu emphasized that the number of licenses granted for stablecoin issuance will be very limited, only in single digits. This aims to tightly control security and financial risks for stablecoin issuers in Hong Kong.
The new regulations focus on aspects such as anti-money laundering (AML) and related requirements to protect the financial system, limiting fraud and money laundering activities through cryptocurrency.
“We hope to receive licensing registration applications as soon as the law takes effect, with the goal of completing licensing this year.”
Xu Zhengyu, Director of the Hong Kong Treasury Bureau, 2024
Does the central bank allow the issuance of stablecoins linked to the Renminbi (RMB)?
Regarding the question of whether licensed financial institutions can issue RMB-linked stablecoins, Xu Zhengyu stated that this issue will require coordinated discussions with relevant agencies due to the involvement of multiple countries' currencies.
This reflects the effort for tighter management over the scope and types of stablecoins issued, especially in the context of cryptocurrencies related to international currencies that may impact monetary policy and financial security.
Real-world examples and expected impacts from stablecoin regulations in Hong Kong
Limiting the number of stablecoin issuance licenses to single digits will help tighten risk control, equivalent to stablecoin issuers in major markets like Singapore or Switzerland. According to reports from the Bank for International Settlements (BIS), strict management of stablecoins helps increase system trust and reduce risks to global finance.
The move from Hong Kong is part of global cryptocurrency regulation, aimed at increasing transparency and controlling cryptocurrency activities while providing a clear legal framework for organizations wishing to enter this market.
“Tight regulation of stablecoins not only protects users but also contributes to the stability of the global financial system.”
Christine Lagarde, President of the European Central Bank, 2023
What are the main criteria in HKMA's new guidelines?
HKMA's guidelines focus on anti-money laundering requirements, user protection, and information security, which have proven effective in traditional financial systems and modern cryptocurrencies. For example, customer identity verification (KYC) processes will be enhanced to prevent illegal activities.
Additionally, stablecoin issuers need to comply with transparency reporting regulations and liquidity risk management to ensure the stable value of stablecoins according to international standards.
Pros and cons of the restricted stablecoin licensing model
Criteria Limited licensing model (Hong Kong) Broad licensing model (other markets) Security and control High, minimizing money laundering and fraud risks Lower due to diverse issuers Innovation Lower due to limited number of issuers Faster innovation, diverse products Market impact Increases volatility and systemic risks Issuance scope Only qualified issuers are licensed Wide scope, emergence of new types of stablecoins
Frequently Asked Questions
How does Hong Kong's Stablecoin Law affect the cryptocurrency market?
The law helps make it more transparent and safer for users, controlling financial risks related to stablecoins.Why is the number of stablecoin issuance licenses limited?
To ensure control of risks against money laundering and protect a strong financial system.Will the Hong Kong Central Bank allow RMB-pegged stablecoins?
Needs to be discussed with relevant agencies due to international currency implications; no final decision yet.How does the application process for the stablecoin law take place?
HKMA seeks opinions in July, law takes effect in August, and licensing in 2024.What is the role of anti-money laundering in this law?
Core factor, ensuring the prevention of criminal activities through cryptocurrency.
Source: https://tintucbitcoin.com/hong-kong-len-ke-hoach-cap-phep-stablecoin-2024/
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