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Hong Kong releases questionnaire for stablecoin recommendations

 


Stablecoins make up 5% of the total crypto market.

The Hong Kong Monetary Authority (HKMA) has released a questionnaire raising eight policy-based issues for recommendations on how to regulate crypto and stablecoins.

Aiming to create a comprehensive regulatory framework by 2024, the Central Bank of Hong Kong, in the document titled “Discussion Paper on Crypto-assets and Stable Coins,” highlighted the challenges posed by the massive growth of the stablecoin industry.

The paper discusses regulatory recommendations from other international regulators, including the United States Financial Action Task Force (FATF), the Financial Stability Board (FSB) and the Basel Committee on Banking Supervision (BCBS).

HKMA concluded that while the crypto-asset economy is currently not large enough to systemically threaten global financial stability, this may soon change:

" The growing exposure of institutional investors to such assets as an alternative to or as a complement to traditional asset classes for trading, lending and borrowing [...] suggests a growing entanglement with the mainstream financial system."

The report also discussed the market caps of major stablecoins in detail, highlighting that stablecoins accounted for 5% of the total crypto market with a global market cap of $150 billion as of December 2021.

The state-backed regulator further presented that payments-related stablecoins can have crucial utility when integrated into the mainstream financial system or even into day-to-day commercial and economic activities.

Therefore, the HKMA is considering expanding the Payment Systems and Stored Value Facilities Ordinance (PSSVFO), a law that regulates the legality of financial products, the report said.

The regulator outlined five possible outcomes for dealing with stablecoins — no action, opt-in, risk-based, back-up, and blanket ban. A decision is made taking into account, among other things, the political recommendations in the questionnaire. Stakeholders are expected to submit their responses by March 31, 2022.

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