Hong Kong Monetary Authority: Consultation on the legislative proposal for implementing a regulatory regime for stablecoin issuers and launching a "sandbox" arrangement

On December 27th, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) jointly issued a public consultation paper to collect opinions on legislative proposals regarding regulatory stablecoin issuers. The document states that due to the important role of stablecoins in the Web3 and virtual asset ecosystems, as well as the increasing connection between traditional financial systems and virtual asset markets, the government believes it is necessary to establish a regulatory framework for fiat-backed stablecoin issuers. As virtual assets become more popular, regulating fiat-backed stablecoin issuers through risk-based and flexible approaches can effectively manage potential currency and financial stability risks while providing transparency and appropriate constraints.

The HKMA will also launch a "sandbox" arrangement to communicate regulatory expectations and provide compliance guidance to interested parties who have specific plans to issue fiat-backed stablecoins in Hong Kong. At the same time, they will collect feedback on proposed regulatory requirements in order to facilitate the implementation of subsequent regulatory frameworks and ensure that they align with regulatory objectives. Further details about the "sandbox" will be announced separately.