Hong Kong Government Discusses Law Regulating Crypto Industry And Stablecoins

Hong Kong regulates stablecoins and the domestic crypto industry. (Photo; Doc. Cryptopolitan)

JAKARTA - Hong Kong, a special administrative area that is part of China, is drafting new regulations to regulate the crypto industry, particularly stablecoins and over-the-counter (OTC) crypto trading.

For information, stablecoins are crypto types whose value is associated with fiat currency or other assets, while OTC trading is a direct transaction between two parties without going through the exchange.

This regulation aims to increase protection for investors, prevent financial crime, and maintain financial system stability.

The Hong Kong government has launched two public consultations regarding this regulation, namely consultations on licensing for OTC crypto trading service providers, which took place from January 3 to April 12 and consultations on licensing regimes for stablecoin publishers, which took place from 7 December to 29 February.

These two consultations invite input from stakeholders and the general public regarding the legislation proposal prepared by the Bureau of Financial and Treasury Services (FSTB) and the Monetary Authority of Hong Kong (HKMA).

According to the proposal, all OTC crypto trading service providers and all stablecoin issuers referring to fiat currency must obtain licenses from the Securities and Futures Commission (SFC) and HKMA, respectively.

Christopher Hui, Secretary of Financial Services and Treasury, said that this regulation is important to overcome the challenges and risks posed by the development of the crypto industry.

He also mentioned that the SFC has stepped up law enforcement efforts against crypto-related criminal cases, whose amounts and values have increased significantly in recent years.

On the other hand, the Hong Kong government also supports the innovation and development of the crypto industry, as long as it is carried out in a safe and responsible manner.

One of the initiatives proposed by the Hong Kong General Chamber of Commerce (HKGCC) is the 'Virtual Asset Connection Scheme', which aims to facilitate cross-border trading between Hong Kong and China using a yuan-based stablecoin.

HKGCC suggests that the government should allow the issuance of stablecoins related to yuan or supported by baskets of various fiat currencies, including yuan, Hong Kong dollars, or US dollars.