Hong Kong is looking to expand its crypto regulation to cover trading platforms and stablecoins and non-asset-backed cryptocurrencies.
Hong Kong’s central bank is looking for comments on cryptocurrency regulation. The request for comment comes amidst global concerns of crypto being used for criminal activities.
The Hong Kong Monetary Authority has released a paper on the topic. “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,” said the HKMA in the paper. Eddie Yue, the chief executive of the HKMA, points to crypto’s market cap as an indicator of the extent to which crypto has integrated with the existing financial system.
Banks’ relationship with crypto platforms
The paper admits that there is a burgeoning interest from banks and customers in exploring crypto opportunities. The report notes the uptrend in market capitalization of crypto assets, especially since the pandemic outbreak. It also records that the HKMA views non-asset-backed cryptocurrencies as mainly used for speculation.
Concerning crypto asset service providers’ interaction with banks and traditional institutions, the paper strongly advises traditional institutions to adopt risk-mitigation measures before any with a crypto platform deal is finalized.
The country’s Securities and Futures Commission has undertaken a recent exercise to create an opt-in regime for crypto trading platforms that may morph into a licensing regime to meet anti-money laundering and terrorist financing requirements. Now the HKMA is looking for comment on a broader array of issues, including stablecoins, investor protection, and financial institutions’ interaction with crypto assets.
The HKMA said in the paper that they see it necessary for stablecoins to be regulated before being used or marketed in Hong Kong. They also see a need to monitor potential risks that sharp crypto price corrections could pose to the traditional financial system.
Outcomes of paper
The HKMA sees five possible outcomes from the request for comment. The first one is “No action,” the second is an opt-in/pilot regime, the third a risk-based approach to deal more pointedly with risks, the fourth a catch-all strategy to address risks more broadly, and the last a total ban. The first option would see risk continue to grow, while the last one has the potential to stifle innovation.
In conclusion, the HKMA believes that employing a risk-based strategy would be the most appropriate way forward. They require responses to the paper to be submitted by March 31, 2022.
What do you think about this subject? Write to us and tell us!
Disclaimer
All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.
