Asia’s Crypto Adoption: Hong Kong Official Plots Rules For Stablecoins, Crypto OTC Services

Hong Kong Financial Services Secretary Christopher Hui reiterated that lawmakers intend to propose legislation on stablecoins and virtual asset over-the-counter (OTC) services. Hui said that, as part of proposed legislation on OTC services, “virtual asset services providers may be required to be licensed by the Commissioner of Customs and Excise (CCE).”

The proposals would cover all OTC services “irrespective of whether the services are provided through a physical outlet and/or other platforms; providing powers for CCE to supervise the [anti-money laundering] conduct of licensees, and enforce the statutory and regulatory requirements under the new regime; and providing transitional arrangement to facilitate the effective implementation of the regulatory regime.” Separately, some stablecoin issuers — depending on criteria — would be required to register with the Hong Kong Monetary Authority under a different regulatory proposal.

The proposal, made in December of last year, is open for public consultation until Feb. 29. “The proposed regulatory regime will also prohibit the advertising of unlicensed issuers’ stablecoin issuance,” Hui said. The HKMA said last year that the regulations were meant to encourage virtual asset innovations “in a sustainable manner, while actual and potential risks from the perspectives of monetary and financial stability, consumer protection as well as money laundering and terrorist financing, can be identified and properly addressed.”

Hui’s clarity on potential crypto regulation came after receiving a written question on where Hong Kong stands regarding crypto trading regulations. Earlier this week, the HKMA issued guidance to firms offering digital asset custodial services. The guidance includes allocating resources, segregating the client’s digital assets and safeguarding those assets.