Chiu stated on Tuesday his goal to establish regulatory guidelines for stablecoin issuers in Hong Kong by mid-2024, as reported in the local media.
Stablecoins are cryptocurrencies that are pegged to relatively stable assets, such as fiat currencies (e.g. US dollars). They function as a digital medium for transactions with traditional money, while benefiting from blockchain technology in terms of speed, programmability, borderlessness, and other advantages.
In August, a consortium of industry experts suggested that the Hong Kong government should introduce its own stablecoin called the HKDG, as a competitor to established stablecoins like USDT and USDC. They argued that the current plan, which permits private institutions to issue stablecoins, would not be able to compete.
Earlier this month, Hong Kong lawmaker Jonny Ng extended an invitation to Vitalik Buterin to learn about the country’s regulatory efforts in adopting cryptocurrency, following Buterin’s questioning of its long-term commitment to the industry.
While China has cracked down on cryptocurrencies, Hong Kong has taken a more crypto-friendly approach. In June, the city introduced its cryptocurrency licensing regime, allowing licensed exchanges to offer retail trading services.
This strategy has positioned Hong Kong as an attractive destination for cryptocurrency firms seeking a favorable regulatory environment. Some analysts, including Hochan Chung, CryptoQuant’s Head of Marketing, have suggested that the resurgence of trading liquidity in the region could boost Bitcoin’s price in the coming months.
In the United States, stablecoin regulations are gradually progressing, with the Clarity for Payment Stablecoins Act receiving approval from the House Financial Services Committee in July. However, there are doubts about its ability to pass the Democrat-controlled Senate, which appears mostly opposed to the bill.
Hong Kong Crypto Investigations
As Hong Kong refines its stablecoin regulations, authorities have initiated investigations into alleged misconduct in the cryptocurrency retail trading sector.
The police have arrested eight individuals on suspicion of conspiracy to defraud in connection with the JPEX cryptocurrency exchange. Additional arrests may be made as the investigations continue.
There have been 1,641 complaints related to the JPEX case, with claimants stating that they were unable to withdraw their assets from the exchange. These complaints could account for a potential sum of approximately HK$1.19 billion ($152 million) at risk, according to the police.