Investors in Hong Kong and the United States could expect new stablecoin regulations in 2024.
Regulatory clarity for the stablecoin market is set to be unveiled by the Hong Kong Monetary Authority (HKMA) by the end of 2024, following the successful wrapping up of a public consultation process.
According to the Hong Kong government Under Secretary for Financial Services and the Treasury, Joseph Chan Ho-Lim, recently, the administrative region has seen an uptick of fintech entities.
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In January 2022, Hong Kong kicked off dialogues surrounding stablecoin regulations. A compilation of eight policy-centric inquiries was provided by the HKMA, along with five possible regulatory results: a catch-all regime, an opt-in regime, a blanket prohibition, a risk-based regime, and no action.
By January 2023, algorithmic stablecoins were barred from the region’s stablecoin structure, with the HKMA requiring stablecoin issuers to ensure their values are backed with underlying reserve assets constantly.
Following the public consultation, the HKMA now shifts its attention towards governance, stabilization, and issuance.
In 2023, Hong Kong has shown significant leadership in crypto regulation, particularly when many Western nations remain wary of the emerging sector. It has opened up cryptocurrency trading to retail traders and implemented a licensing regime for crypto exchanges, mandating strict compliance with Anti-Money Laundering regulations.
Meanwhile, the United States House Financial Services Committee is also actively exploring stablecoin market regulations. In 2023 alone, the committee has put forth three draft bills regarding stablecoins, with the most recent proposal granting considerable authority to the Federal Reserve and allowing limited intervention from state authorities.
However, stark contrasts exist between the local regulators in the two nations.
While Hong Kong regulators are actively turning the nation into a hub for crypto, US regulatory actions might inadvertently compel many established businesses, including stablecoin issuers, to relocate.
Several stablecoin issuers have been accused of violating securities law by the US Securities and Exchange Commission, which has also initiated a lawsuit against Binance and its stablecoin BUSD, issued by Paxos.
