TechFlow reports that the Hong Kong Treasury Department and the Monetary Authority have released a consultation summary on the regulatory regime for fiat-backed stablecoin issuers. The vast majority of respondents support introducing regulation to manage potential monetary and financial stability risks. The Treasury Department and the Monetary Authority will finalize legislative proposals based on feedback and submit a bill to the Legislative Council as soon as possible. The Monetary Authority is currently processing applications for the stablecoin issuer "sandbox" and will announce the list of participants shortly.
The authorities noted that insufficient reserve assets could lead users to rush to redeem stablecoins at face value, potentially triggering a run. They emphasized that circulating fiat-backed stablecoins must be fully backed by reserves at all times. Licensed fiat-backed stablecoin issuers will be required to demonstrate to the Monetary Authority that they have measures in place (such as excess reserves) to comply with this requirement.
The consultation paper proposes that the minimum paid-up capital for issuers should be the higher of HKD 25 million or 1% of their outstanding stablecoin amount, while retaining flexibility to impose additional capital requirements. Some respondents suggested allowing retail investors to purchase foreign-issued fiat-backed stablecoins. The authorities stated they will consider establishing regulatory cooperation mechanisms with jurisdictions that have comparable regimes. The Monetary Authority stressed that issuers must not arrange with third parties to offer interest payments to users of fiat-backed stablecoins.
