The Hong Kong Special Administrative Region of the People’s Republic of China, through its Hong Kong Monetary Authority (HKMA); the central banking institution, is joining the list of states with their eyes set on taking firm decision on, or putting in place, public-oriented crypto-asset and stablecoin regulatory framework. HKMA introduced a questionnaire where it seeks to gauge the opinions of members of the public; and has a plan to set in place stablecoin and crypto-asset technology regulatory frameworks by 2023-2024.
Relevant Regulatory Questions Raised
The HKMA raised narrowed questions pertaining to regulation of, and possible policy framework on stablecoins and crypto-assets in the following areas:
- Whether to take no action.
- Consideration of an opt-in regime/pilot regime.
- Whether to default to a risk-based regime.
- Whether to introduce a comprehensive policy and regulatory regime.
- Whether to introduce a total ban on these novelty market products i.e. stablecoins and crypto-assets.
“Possible policy options for regulating crypto-assets. Source: HKMA.”.
Probably encouraged by the stablecoin and crypto-asset sector potential growth opportunities, the HKMA sheds light on the stablecoin market capitalization as a 5% subset of the overall crypto-asset market capitalization, as well as alluded to the recommendations, policy and regulatory framework attempts made by certain international standards-setting bodies like the Financial Action Task Force (FATF), Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB).
“Market Capitalization of Crypto-assets. Source: HKMA”.
“Market Capitalization of Major Stablecoins. Source: HKMA.”.
While the HKMA admits the fact that stablecoins and crypto-assets are growing in accordance with increasing demand by institutional investors, it also stated further that stablecoins which are payment-related can be potentially integrated into the everyday mainstream commerce and economic market activities.
Thus, the rationale expounded therein will have an impact and effect on the HKMA Payment Systems and Stored Value Facilities Ordinance (PSSVFO). Experts and industry stakeholders are expected to make their response submission before the 31st March, 2022 set closing date.