(Bloomberg) -- Hong Kong plans to introduce a licensing regime for stablecoin issuers whose tokens reference the price of fiat currencies, the city’s de facto central bank said on Wednesday.
Under the proposed regime, issuers of stablecoins that track fiat currencies in the city will need to obtain a license from the Hong Kong Monetary Authority, the local watchdog said in a joint statement with the Financial Services and the Treasury Bureau outlining the conclusions of a consultation. To ensure stablecoins are fully backed, issuers will also need to publish monthly attestations on reserve assets conducted by a third-party auditor.
The licensing regime will “further strengthen” Hong Kong’s regulatory framework for virtual assets, said Christopher Hui, Secretary of the FSTB, in the statement.
The proposals are the latest steps in Hong Kong’s efforts to fashion itself as a digital-asset hub — part of a broader bid to restore the city’s allure as a global business center following a crackdown on dissent.
In recent years local authorities have permitted retail crypto trading on a limited basis and issued licenses to digital-asset exchanges, while also permitting the launch of a batch of spot-Bitcoin and Ether exchange-traded funds earlier in 2024.
Stablecoins are a form of cryptocurrency that aim to mirror the price of another asset, most commonly the US dollar. They tend to be backed by reserves of cash-like assets and bonds, and have a range of use cases that include cross-border payments and remittances.
Under Hong Kong’s proposed rules, reserve assets must be held in custody at local banks, although the HKMA said it is open to custody arrangements involving overseas lenders on a case-by-case basis.
The proposed legislation on the new rules will be tabled for lawmakers to review later this year, the HKMA said.
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