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Regulatory Policy for Virtual Currency and Stablecoins
The Hong Kong Monetary Authority announced on January 31 its policy on the regulation of crypto assets (virtual currency) and stablecoins. It presents regulated activities and a comprehensive regulatory framework, especially for stablecoins.
The Monetary Authority issued a consulting paper on cryptocurrency and stablecoin regulation in January last year, seeking comment from a variety of interested parties. This policy was established by considering feedback from various places.
58 groups gave their views on the consultation document. Among them, major companies in the industry such as the main Web3 Animoka Brands, the largest virtual currency exchange Binance, Ripple, and R3 are listed.
Connection: Hong Kong Monetary Authority Issues Agreement on Regulation of Virtual Currency and Stablecoins
What are stablecoins
Cryptocurrency whose price is always stable. Stablecoins are a type of cryptocurrency, and unlike volatile assets like BTC, ETH, and XRP, their goal is to maintain their value ($1) backed by US dollars. In addition to US dollar-backed stablecoins (USDT/USDC), there are also stablecoins that use algorithms such as DAI and UST.
Cryptocurrency Glossary
Stablecoin regulation
The Monetary Authority will require that licenses be obtained for entities that carry out activities related to stablecoins. We will assess the risk according to the stablecoin structure and adopt an approach to minimize it.
First, as a priority, we will prioritize the regulation of stablecoins whose values are tied to legal currencies. This stablecoin is judged to pose more financial risk and financial stability than the others. In the future, we plan to regulate other stablecoins as well.
Regulated activities include management and operation of stablecoins, issuance, stabilization of value, provision of reserves and provision of wallets.
Businesses that require a license from the Hong Kong authorities include businesses that carry out regulated activities in Hong Kong, businesses that provide services in Hong Kong, and businesses that carry out activities related to stablecoins that are linked to the value of the Hong Kong dollar. Become.
No collateralized stablecoins are allowed
The Monetary Authority also lays out regulatory principles. First, it requires full support and redemption at face value.
Regarding “fully supported”, unsecured stablecoins that stabilize value through arbitrage or algorithm trading are not allowed. He added that the value of stablecoin reserve assets must always match the value of stablecoins in circulation and must be highly liquid.
As a backdrop, in May last year, the price of the stablecoin UST, whose value is supported by an algorithm, collapsed, triggering a chain of defaults in the cryptocurrency market.
Connection: South Korean prosecutors to investigate all Terraform Labs employees over the UST drop= report
The Monetary Authority also stipulates that regulated businesses may not engage in activities that deviate from the business permitted under the license granted. For example, it is considered inappropriate for wallet operators to carry out lending operations.
Other areas such as stablecoin ownership, risk management, anti-money laundering and counter-terrorist financing, user protection, auditing and disclosure will also be developed with regulatory requirements.
Hong Kong is active in virtual currency
The Hong Kong government is pursuing policies to promote the development of the cryptocurrency industry. Last December, Hong Kong’s parliament passed a law introducing a licensing system for cryptocurrency service providers.
In January, the CEO of the Hong Kong Securities and Futures Commission said he was working on rules to allow retail investors to trade cryptocurrencies.
Connection: Hong Kong authorities allow individual investors to trade virtual currencies
Hong Kong Authorities Post Decides Regulatory Policy for Virtual Currencies and Stablecoins appeared first on Our Bitcoin News.
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