Hong Kong intensifies its push for innovation in the cryptocurrency sector by issuing a new policy statement on digital assets and initiating a consultation on dealers and custodians for these digital assets.

Hong Kong intensifies its push for innovation in the cryptocurrency sector by issuing a new policy statement on digital assets and initiating a consultation on dealers and custodians for these digital assets.

In the rapidly evolving world of virtual currencies, regulatory bodies are stepping up to establish frameworks that ensure transparency and mitigate risks. Here's a roundup of recent developments in stablecoin regulation across the globe.

New York and Hong Kong Lead the Way

The New York Department of Financial Services (NYDFS) has issued new guidance for cryptoasset industry participants, emphasizing compliance with rules related to cybersecurity, sanctions, and virtual currencies. Meanwhile, Hong Kong is set to introduce a comprehensive regulatory framework for stablecoin issuers, known as the Stablecoins Ordinance, effective from August 1, 2025.

The Hong Kong Monetary Authority (HKMA) will begin accepting license applications for stablecoin issuers once the ordinance comes into effect. The HKMA has emphasized that only a handful of licenses will be granted initially, focusing on applicants demonstrating viable use cases, prudent operation, and strong governance. Non-compliance will result in penalties, including fines and imprisonment.

International Alignment and Risk Management

Hong Kong's approach to stablecoin regulation aligns with international standards, following similar developments in jurisdictions like the European Union, the United States, Singapore, and the United Kingdom. The HKMA has highlighted the importance of risk management, particularly in areas such as reserve asset protection, price stability, redemption processes, and anti-money laundering (AML) practices.

Regulation in the United States

In the United States, the US Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to establish policies for considering cryptoassets held on US regulated centralized exchanges as reserves when conducting risk assessments on single-family mortgage loans. New York Attorney General Letitia James has also sent a letter to leadership in both the US Senate and House of Representatives urging them to take steps to strengthen provisions in legislation that would establish a regulatory framework for stablecoin issuers.

Shifting Policy Landscape in South Korea

The Bank of Korea has paused a pilot project aimed at testing a central bank digital currency (CBDC) due to the potential impact of stablecoins amid a shifting policy landscape in South Korea.

Crypto-Backed Mortgage Lending

Mortgage lenders that can extend loans to cryptoasset investors will be well-positioned to drive growth as they encounter more and more homebuyers who have a portion of their wealth in cryptoassets. The US Federal Housing Finance Agency (FHFA)'s order seeks to give mortgage lenders the ability to lend to the growing population of aspiring home buyers who have invested in cryptoassets.

Regulation of Virtual Asset Dealers and Custodians

The Securities and Futures Commission (SFC) in Hong Kong has launched a consultation aimed at bringing virtual asset dealers and custodians within the regulatory perimeter. Similarly, the SFC in Singapore proposes that any person providing custody services not already subject to regulatory supervision will be required to obtain a license with the SFC and meet AML/CFT requirements.

The Future of Stablecoin Regulation

The Financial Action Task Force (FATF) has published a report signaling a growing focus on the financial crime risks and challenges related to stablecoins over the coming year. New York Attorney General Letitia James argues that both the GENIUS Act and the STABLE Act do not go far enough to protect investors and that they should regulate all stablecoin issuers as banks, requiring that they face stronger capital requirements and that holders' stablecoin deposits be insured by the Federal Deposit Insurance Corporation.

Embracing Digital Asset Innovation

The Government of Hong Kong has published Policy Statement 2.0, aiming to reinforce its commitment to establishing Hong Kong as a global hub for digital asset innovation. The Policy Statement introduces the LEAP Framework, which has four pillars: legal and regulatory streamlining, expanding the suite of tokenized products, advancing use cases and cross-sectoral collaboration, and people of partnership development.

In Texas, the state has established a State-Funded Bitcoin Reserve, managed by the Texas Comptroller of Public Accounts, with an advisory committee of professional cryptoasset investors. Only cryptoassets with a market capitalization exceeding $500 million can be included in the fund, meaning that at this stage only Bitcoin is eligible for inclusion.

[1] [Hong Kong Monetary Authority (HKMA). (2023). Stablecoin Regulation in Hong Kong. Retrieved from https://www.hkma.gov.hk/media/eng/doc/key-initiatives/stablecoin-regulation-in-hong-kong

[2] [Financial Services and the Treasury Bureau (FSTB). (2023). Stablecoins Ordinance. Retrieved from https://www.fstb.gov.hk/static/en/consultations/consultation_content/20230521_stablecoins_ordinance.pdf

[3] [Financial Action Task Force (FATF). (2023). FATF Calls for Greater Focus on Stablecoins. Retrieved from https://www.fatf-gafi.org/media/fatf/documents/recommendations/Updated-Guidance-Stablecoins.pdf

1. There is increasing emphasis on blockchain analytics as regulatory bodies worldwide strive to monitor transactions in the virtual currency sector.
2. News channels and outlets have been covering the recent developments in stablecoin regulation, highlighting the efforts of different countries to ensure security and transparency.
3. Elliptic, a well-known blockchain analytics firm, has been providing insights into stablecoin transactions and identifying potential scams in the industry.
4. As part of its dedication to security, the New York Department of Financial Services requires crypto industry participants to comply with rules related to transaction monitoring and cybersecurity.
5. Industry experts are conducting webinars on the latest trends in stablecoin regulation, discussing topics such as due diligence, AML practices, and reserve asset protection.
6. The finance industry is closely following the developments in stablecoin regulation, understanding the impact on investment opportunities and personal-finance management.
7. Cybersecurity companies are seeing an increased demand for their services as financial institutions seek to bolster their defenses against potential threats in the stablecoin space.
8. In the lifestyle sector, fashion-and-beauty, food-and-drink, home-and-garden, and business publications have begun discussing the implications of stablecoin regulation on consumer behavior and business operations.
9. The growing interest in investing in virtual currencies has led to a rise in articles and content focused on understanding stablecoin regulation and its effect on the investing landscape.
10. Books on finance, educational resources, and self-development are increasingly covering topics related to stablecoin regulation to help readers navigate the complex financial world.
11. Online shopping platforms and digital marketplaces are keenly following the developments in stablecoin regulation to adapt their policies and practices accordingly.
12. Social media platforms have become a forum for discussions on stablecoin regulation, with users seeking information and experts sharing insights on the subject.
13. Movies and TV shows are incorporating elements of stablecoin regulation in their storylines to reflect the current state of the virtual currency market.
14. In the entertainment industry, there have been discussions about the potential use of stablecoins in casino-and-gambling scenarios to enhance security and transaction speed.
15. General-news outlets have been reporting on the implications of stablecoin regulation for various aspects of life, including sports, weather, travel, and even books.
16. With the increasing popularity of stablecoins, the world of banking-and-insurance is closely watching the developments in regulation to adjust their offerings and minimize risks.
17. Data-and-cloud-computing companies are collaborating with regulatory bodies to develop innovative solutions that support stablecoin regulation and promote technology advancements, such as artificial-intelligence and technology, in the financial sector.

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