Hong Kong has become one of the most important cities in terms of the use and dissemination of cryptocurrenciesbut in the midst of the boom, the authorities have started to regulate them so that they do not get out of control.
This is how the Hong Kong Monetary Authority (HKMA). indicated that it will begin requiring companies to maintain their core business and have a locally incorporated entity in the territory if they want to obtain stablecoins or stablecoins licenses.
The stablecoins are currencies whose value is always related to a fiat currency, in most cases the dollar.
The HKMA’s current position is that stable currencies must be fully backed by high-quality liquid assets and be exchangeable for their par-referenced fiat currencies. Under this regime, algorithmic and arbitrage currencies are not allowed.
The collapse of Terraform Labs and the algorithmic stable coin TerraUSD last year led regulators around the world to focus on regulating stable coins.
The regulations of stablecoins at Hong Kong may come into force as early as this year. The proposed regime will cover entities if they actively trade or operate there. It will also increase the number of licenses an issuer will need.
From Coindesk spoke with a representative of the Hong Kong Monetary Authority and this indicated that “the regulatory treatment for different types of virtual assets would depend, among other things, on their actual structures and operational details.”
“We will continue our ongoing discussion with the industry with a view to adopting an agile, pragmatic and risk-based approach to regulating stable coins,” the representative said, adding that the regulator “will consult further on granular details.”
There is a possibility that the HKMA will relax its stance because the city is trying to welcome talent and maintain its position as an international financial center.
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