Hong Kong Stablecoin Regulation Finalized: Participants in the "sandbox" will be announced, issuers must maintain a 100% reserve

ChainCatcher News, according to Ming Pao's report, the Hong Kong Treasury Bureau and the Monetary Authority yesterday issued a consultation summary on the legislative proposal for implementing a regulatory system for issuers of fiat-backed stablecoins in Hong Kong. The vast majority of respondents agreed that there is a need to introduce a regulatory system for issuers of fiat-backed stablecoins to appropriately manage potential currency and financial stability risks, and provide transparency and appropriate constraints.

The Treasury Bureau and the Monetary Authority will finalize the legislative proposal to implement the regulatory system based on respondents' opinions and suggestions, and submit a draft regulation to the Legislative Council as soon as possible; The Monetary Authority is also processing sandbox applications from stablecoin issuers and will announce the list of participants in the short term. According to feedback received, most respondents support requirements such as maintaining full reserves at all times equal to or exceeding the total value of reserve assets backing fiat-backed stablecoins. Some respondents raised concerns about potential difficulties in conducting real-time reconciliation checks, as well as significant procedures needed to periodically replenish reserve assets to ensure their market value is at least equal to the face value of circulating fiat-backed stablecoins.

Furthermore, it was suggested in the consultation document that an issuer's minimum paid-up capital should be at least 2% of total circulating fiat-backed stablecoin amount or HK$25 million, whichever is higher. Some respondents believe that adhering strictly based on circulating volume poses challenges in maintaining sufficient capital timely. The authorities will adjust this requirement by setting it at HK$25 million or 1% of their stablecoin circulation amount, whichever is higher; Financial Secretary retains flexibility and authority to impose additional capital requirements when necessary.