At the end of December Hong Kong launched a consultation on legislative proposals related to stablecoin issuers. The consultation is jointly run by the Hong Kong Monetary Authority (HKMA) which will be the stablecoin regulator and the Financial Services and the Treasury Bureau (FSTB). It runs until the end of February. Additionally, the HKMA plans to launch a regulatory sandbox for the same purpose.
One of the concerns is that stablecoins are a source of interconnectedness between the traditional financial (TradFi) system and cryptocurrencies. Hence, they present a potential financial stability risk that the authorities want to manage. The consultation explicitly mentioned the 2022 Terra UST collapse.
Additionally, the move is seen as a step in maintaining Hong Kong’s status as an international financial center. Other objectives include protecting stablecoin users and fostering a sustainable cryptocurrency (virtual asset) ecosystem in Hong Kong.
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