Hong Kong Monetary Authority is Working Towards Efficient Stablecoins Regulations – Coinpedia Fintech News
Following the collapse of Terra Luna UST last year, which wiped out over $30 billion from the crypto market, the Hong Kong Monetary Authority (HKMA) is gearing up to regulate the stablecoins industry. According to the HKMA’s consultation conclusion, all stablecoins operating within its jurisdiction must be fully backed by high-quality liquid assets. The HKMA insists that all the stablecoins provided in the country must be redeemable to their referenced fiat currencies at par.
However, the HKMA has highlighted that algorithmic and arbitrage stablecoins are prohibited. This could mean Cardano’s over-collateralized stablecoin Djed will not receive regulatory approval in Hong Kong.
A representative from the HKMA said that “Regulatory treatment for different types of virtual assets would depend on, among other things, their actual structures and operational details. We will continue discussing with the industry to adopt a risk-based, pragmatic and agile approach to regulate stablecoins.”
Reportedly, the Hong Kong Monetary Authority intends to have a stablecoins regulations framework by the end of this year.
Stablecoins Market Doomed?
The stablecoins market has become a critical cog steering global crypto adoption. The stablecoins available in the market, including Circle’s USDC and Tether USDT, are used to take profits during the highly volatile crypto market. However, their growth prospects are dimmer as countries push for CBDC’s adoption.
Moreover, CBDCs are more regulated by respective central banks and operate on different chains for interoperability purposes.
Recently, the Binance-backed BUSD stablecoin was halted by United States regulators. As a result, whale migration en masse has been spotted, leaving the stablecoins markets towards the Bitcoin spot. Moreover, claims of Binance not providing enough collateral on existing stablecoins have aroused regulatory scrutiny.
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