Hong Kong wants to broaden its regulatory approach to crypto to include stablecoins, unbacked cryptocurrencies, and crypto trading platforms.
Hong Kong is seeking input on a cryptocurrency regulatory regime. This comes amid widespread concern that cryptocurrencies have become increasingly attractive to criminals.
A paper on the subject has been published by the Hong Kong Monetary Authority. “We emphasize issues that may affect the public’s confidence in, and the safety, efficiency, and soundness of our payment systems, and accord appropriate priority to the protection of users,” the HKMA wrote in the document. The HKMA’s chief executive, Eddie Yue, cites the market capitalisation of crypto as a sign of how well it has melded with the traditional financial system.
The paper acknowledges that banks and customers are increasingly interested in crypto’s potential. The research highlights the rise in market value of crypto assets, particularly after the onset of the pandemic. The HKMA further states that non-asset-backed cryptocurrencies have primarily found use as speculative investments.
When it comes to the integration of crypto services with banks and existing institutions, the paper firmly recommends institutions to implement risk-mitigation procedures before finalising any contract with a crypto platform.
Hong Kong’s Securities and Futures Commission recently completed an exercise to build an opt-in framework for crypto platforms, which might evolve into a licensing regime to comply with anti-money laundering and terrorist financing laws.
The paper states that stablecoins must be regulated before being allowed in Hong Kong. It also believes that there is a need to keep an eye on the threats that abrupt crypto market corrections could bring to the financial system.
The Hong Kong Monetary Authority expects five possible results from the request for discussion: no action, an opt-in/pilot programme, a risk-based approach to handle risks more specifically, a catch-all risk plan, and lastly a complete ban.