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The Hong Kong Monetary Authority, the city's financial regulator, has published its consultation conclusion on crypto assets, with stricter rules surrounding stablecoins on the cards.
In January 2o23, HKMA issued a discussion paper that set out its regulatory approach on crypto assets and stablecoins, and invited views from the industry and public on the relevant regulatory approach. It received 58 responses from industry participants, professional bodies and more.
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"On the whole, the respondents were supportive of regulating stablecoins with a risk-based and agile approach. The respondents also broadly supported the need to take into account the latest market developments and draw reference from the discussion of international regulatory bodies when developing the relevant regulatory regime," the regulator said in an announcement on Tuesday.
The consultation conclusion, published Tuesday, indicates the expected regulatory scope and key regulatory requirements, which includes full backing and redemption at par, meaning that stablecoin issuers have to back up their values with underlying reserves assets of high quality and high liquidity.
Algorithmic stablecoins, which are stablecoins that derive their value based on arbitrage or algorithm, will not be accepted in the new regime, HKMA said, noting that it will "continue to monitor market developments and the risks that different categories of crypto-asset may pose to monetary and financial stability."
The new regulatory regime for stablecoins is expected to be rolled out by 2024, Eddie Yue, HKMA chief executive, said.