Hong Kong and US target stablecoin regulations by 2024.

The Hong Kong Monetary Authority has recently concluded a public consultation on regulations for stablecoins, with the goal of introducing clear regulatory guidelines for the stablecoin market by the end of 2024.

Joseph Chan Ho-Lim, deputy director of the Hong Kong Financial Services and Treasury Bureau, stated that in the past five years, Hong Kong has become a popular destination for fintech firms. Chan added that Hong Kong authorities are actively working to promote the Web 3 ecosystem with a focus on protecting investors.

Hong Kong began its stablecoin regulations in January 2022, during which the KHMA shared a list of eight questions to seek policy-related recommendations and cited five possible regulatory outcomes — no action, opt-in regime, risk-based regime, catch-all regime, and blanket ban. A year later, the regulatory discussions outright prohibited the incorporation of algorithmic stablecoins after the Terra-Luna debacle.

With the completion of the public consultation phase, the HKMA will focus on the areas of issuance, governance, and stabilization.

This year alone, Hong Kong has taken the lead in regulating cryptocurrencies at a time when most of its Western counterparts are still taking a cautious approach to this emerging technology. The HKMA has not only opened crypto trading for retail traders, but also started a licensing regime for crypto exchanges that require these businesses to adhere to strict anti-money laundering regulations.

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Aside from Hong Kong, the United States House Committee is also seeking to introduce strong regulations around the stablecoin market. The US House Committee has introduced three draft stablecoin bills in 2023, with the latest one proposing key powers to the Federal Reserve with some power given to state authorities to intervene.

The approach of local regulators in the two countries couldn’t have been more different. On one hand, Hong Kong regulators are actively working to make the country a crypto hub, whereas the actions of US regulators might force many established businesses, including stablecoin issuers, to move out. The US Securities and Exchange Commission has accused several stablecoin issuers of violating securities laws and has filed a lawsuit against Binance and its stablecoin BUSD issued by Paxos.

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