Hong Kong Monetary Authority aims to oversee stablecoin reserves

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Hong Kong’s central financial institution, the Hong Kong Financial Authority (HKMA), needs to oversee stablecoin issuance and reserves administration.

HKMA published a dialogue paper on Wednesday relating to cryptocurrencies and stablecoins by which it offered its views on how the trade ought to be regulated in Hong Kong.

Within the 34-page lengthy session doc, the HKMA paid particular consideration to “payment-related stablecoins,” mentioning that the market capitalization of all stablecoins hit $150 billion in December, accounting for five% of the whole crypto market. The regulator added that every one current stablecoins are “largely asset-linked and predominantly pegged” to the USA greenback, together with stablecoins like Tether (USDT) and USD Coin (USDC).

“The fast improvement of crypto-assets, significantly stablecoins, is a subject of eager consideration within the worldwide regulatory group because it presents doable dangers relating to financial and monetary stability,” HKMA stated.

To successfully deal with related dangers, HKMA laid out eight main coverage instructions, proposing to change into a single regulator to oversee entities concerned in each regulating and operating operations like issuing stablecoins and managing their reserves. The authority additionally needs to manage stablecoin transactions’ validation processes, personal key storage administration and executing transactions.

“We encourage present or potential gamers within the stablecoins ecosystem to reply to this paper and submit related views to us, in order that we may take the suggestions into consideration when formulating the regulatory framework,” HKMA wrote. The regulator expects to finalize its subsequent steps as quickly as doable and introduce new rules by 2023 or 2024.

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HKMA shouldn’t be the one monetary regulator involved about stablecoin dangers and planning steps to manage the rising trade. In November 2021, the U.S. President’s Working Group on Monetary Markets issued a report on possible “stablecoin runs” and “fee system dangers.” The U.S. Treasury subsequently hinted at new stablecoin-focused laws in December.