Hong Kong passes stablecoin invoice as extra governments acknowledge the virtual belongings

Hong Kong handed a stablecoin invoice on Wednesday to increase its cryptocurrency licensing regime as extra governments acknowledge the virtual belongings.

Unlike risky virtual belongings like bitcoin, the worth of stablecoins is tied to a real-world asset like fiat currencies or commodities like gold.

The new legislation — excited by fiat-referenced stablecoins — would require stablecoin issuers to acquire a license from the Hong Kong Monetary Authority and agree to a variety of necessities, together with correct control of asset reserves and segregation of shopper belongings.

It will “enhance Hong Kong’s existing regulatory framework on virtual-asset (VA) activities, thereby fostering financial stability and encourging financial innovation,” the central banking frame mentioned. It added that it could habits additional consultations at the detailed regulatory framework.

The Hong Kong executive mentioned in a remark that the stablecoins coverage is anticipated to return into impact this 12 months, with “sufficient time” allowed for the business to know the necessities.

In 2023, Hong Kong presented its digital asset licensing regime, which calls for cryptocurrency corporations with an authentic presence within the town to use for licenses and meet explicit requirements and necessities to provide virtual belongings to retail buyers within the town. However, the present coverage didn’t come with stablecoins in its purview. 

“Hong Kong’s new stablecoin policy sets a global benchmark by mandating full reserve backing, strict redemption guarantees, and HKMA oversight,” YeFeng Gong, chance and technique director of HashKey OTC, advised CNBC. HashKey OTC is a buying and selling arm of the HashKey Group, which has a certified crypto platform in Hong Kong.

The coverage “ensures institutional-grade reliability for traders while positioning Hong Kong as a leader in compliant digital finance,” he added. 

The transfer from Hong Kong comes simply days after the U.S. Senate complex the GENIUS Act, which might identify the primary regulatory framework for issuers of stablecoins if applied.

A push to keep an eye on stablecoins has been intensifying globally, with different jurisdictions having additionally applied their very own regulatory frameworks, together with the European Union, Singapore, the United Arab Emirates and Japan, blockchain intelligence company Chainalysis mentioned in a file on Wednesday.

Chengyi Ong, head of Asia-Pacific coverage at Chainalysis, advised CNBC that the most recent laws are anticipated to lend a hand with crypto adoption and legitimacy. 

“[Stablecoins] form the backbone of the crypto ecosystem, but their stability also opens the door to their use in overcoming frictions dogging traditional finance, such as slow cross-border payments and settlement,” Ong mentioned.

“This potentially transformative utility is what has driven governments around the world, from Europe to Asia, to take steps toward regulatory regimes that will facilitate the emergence of high-quality stablecoins,” she added.

According to Chainalysis, the overall marketplace cap of stablecoins is round $232 billion as of this month.