Hong Kong to set 'high bar' for stablecoin licensing: regulator

Hong Kong will continue to develop its stablecoin licensing regime in an orderly and prudent manner, the Hong Kong Monetary Authority (HKMA) has said, in the process setting"a high bar for licensing" given the novelty and potential risks of the cryptocurrency.

In a written response to China Daily, a spokesperson for the HKMA stated the authority is currently reviewing applications for stablecoin issuer licenses and aims to announce the first batch early next year.

"Considering the novelty and potential risks of stablecoin, the need for user protection, market capacity and long-term development, we expect to set a high bar for licensing. Only a handful of licenses will be granted initially," the spokesperson said.

"Where cross-border activities are involved, applicants are expected to ensure that they and their business partners have the necessary regulatory approvals and will comply with applicable regulations in Hong Kong and other relevant jurisdictions."

Last week, regulators including the People's Bank of China made their clearest statement to date that the use of stablecoins on the mainland fall within the scope of illegal financial activities, saying that the cryptocurrency fails to meet requirements set down for customer identification and anti–money laundering protections.

In reviewing stablecoin issuer license applications, the HKMA will consider whether applicants can demonstrate viable use cases that can effectively address pain points in economic activities and whether they have concrete business plans and the ability to operate in a prudent and sustainable manner, the spokesperson said.

Applicants should also satisfy the regulatory requirements on reserve assets management, redemption, technology, risk management and anti-money laundering.

The HKMA spokesperson added that its exploration of tokenization is intended to"deliver concrete benefits to the real economy and financial markets"in line with the Hong Kong Special Administrative Region government's Policy Statement 2.0 on the Development of Digital Assets.