Hong Kong has set a minimal capital requirement of HK$25 million for corporations searching for to challenge fiat-backed stablecoins within the metropolis.
Regulators require issuers to offer clear and enforceable redemption mechanisms that permit holders to trade stablecoins for fiat foreign money at a 1:1 ratio within the brief time period.
The requirement is a part of the town’s new stablecoin regulatory regime, which legally got here into impact this yr and establishes a licensing framework overseen by the Hong Kong Financial Authority (HKMA).
Hong Kong’s regulatory construction takes form
The town is at the moment establishing a “clear institutional framework” to oversee digital property, with a concentrate on issuance and backing of stablecoins, based on an announcement from Louis Chi-fun, a member of Hong Kong’s Stablecoin Overview Tribunal and the federal government’s Web3 Growth Working Group.
Regulators within the China Particular Administrative Area require candidates to have a capital of not less than HK$25 million to make sure issuers have the monetary capability to soak up market shocks and meet redemption obligations underneath stress, with the particular situation that solely fiat-referenced stablecoins be totally backed by conventional currencies and liquid property.
Chihun mentioned that to correctly and reliably assist the worth of stablecoins, fiat funds raised by issuers must be invested in extremely liquid and low-risk property.
Chi-hung added that “stablecoin issuers can even be required to offer compliance documentation to regulators by impartial audits.” These corporations are anticipated to be independently audited by specialist companies akin to Deloitte, which is able to challenge audit reviews as required by rules, and likewise confirm whether or not the property held by the issuer are really low danger.
A part of the auditor’s job is to “be sure that asset allocation is in line with public info, thereby reinforcing market confidence.”
The worldwide regulatory surroundings continues to broaden
Chi-hung believes that Hong Kong’s sturdy regulatory framework will shield buyers’ security and lay a stable basis for the event of the stablecoin and Web3 industries. The framework is predicted to allow worldwide organizations to challenge or use stablecoins in Hong Kong, facilitating the continued growth of the native digital asset ecosystem.
Hong Kong is in a comparatively favorable place in comparison with the worldwide regulatory panorama, together with the European Union’s Crypto Asset Market Regulation, which got here into impact on June 30, 2024.
Across the similar time, Hong Kong’s stablecoin regime got here into impact, and the US handed the GENIUS Act this yr, introducing some type of regulatory oversight into the crypto and stablecoin house.
