Hong Kong’s de facto central bank on Wednesday invited comments on ways to regulate crypto assets and stablecoins, with the goal of adopting a regulatory framework by 2024 in which the policy spectrum could range from no action to a blanket ban. .
The rapid growth of cryptocurrencies and in particular stablecoins, or digital assets linked to traditional currencies, has attracted the attention of regulators around the world, who fear they could endanger the financial system if left unchecked.
The global market value of crypto assets stands at about $2.2 trillion (approximately Rs. 16,25,741 crore), indicating their growing interconnectedness with the mainstream financial system, said Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority (HKMA).
“We focus on issues that could affect public trust in, and the security, efficiency and soundness of our payment systems, and give appropriate priority to protecting users,” the HKMA said in a paper on the topic.
It is seeking feedback from the public and stakeholders by March 31, in a broader effort than a recent exercise by the territory’s Securities and Futures Commission (SFC) that focused only on virtual asset trading platforms.
In its paper, the HKMA focused on the broader implications of stablecoins that can be used in payments, along with investor protection aspects related to crypto assets, and the interface of regulated institutions with crypto assets.
It listed five possible choices for regulating crypto assets, ranging from no action to a blanket ban.
Regulated institutions are required to “critically evaluate” their exposure to various types of risks and take mitigation measures before engaging with crypto asset service providers, the paper added.
The consultation comes against the background of concerns from policymakers around the world that crypto assets could be used for illegal purposes or to take advantage of unsuspecting consumers.
Such concerns stem from the complexity and volatility of cryptocurrencies, as well as wildly divergent standards around disclosure, reserves and consumer protection aspects.
© Thomson Reuters 2022
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