HKMA Deputy Chief Executive Chan Wai-man said in The InSight that in December last year, the Financial Services and the Treasury Bureau and the HKMA jointly published a consultation document on the legislative proposal to establish a regulatory system for stablecoin issuers, and announced that the HKMA would set up a "sandbox" for stablecoin issuers. The consultation ended on February 12, and more than 2 submissions were received. The Financial Services and the Treasury Bureau and the HKMA are studying these opinions and strive to publish the consultation summary as soon as possible. The HKMA also announced today the launch of the "sandbox" for stablecoin issuers.
He continued that the HKMA has not set an upper limit on the number of participants in the "Sandbox". Taking into account the characteristics of stablecoins and the proposed regulatory requirements, specific requirements are set for participation in this "Sandbox", including that applicants need to prove that they have a genuine intention and reasonable plan to issue legal currency stablecoins in Hong Kong, have a specific plan to participate in the "Sandbox", and have reasonable expectations that they can meet the proposed regulatory requirements. The HKMA will consider a series of factors, such as the application scenarios proposed by the applicants, price stabilization mechanisms, reserve asset management, and protection for users, to assess their applications, and will also maintain communication with the applicants during the process.
Chen Weimin pointed out that the testing of the "Sandbox" is carried out under limited scope and controllable risks. For example, the number of users and the amount of stablecoins issued will be limited, and the use of customer or public funds will not be involved in the initial stage. Depending on the participants' plans and the progress of the test, the HKMA may appropriately adjust the design scenario and application scope of the "Sandbox". The HKMA expects participants to demonstrate through the "Sandbox" a feasible stablecoin issuance process, a robust internal control system to manage major operational areas, including money laundering risks, and adopt appropriate measures to protect the rights and interests of users. The HKMA will also formulate good practices in various operational areas based on the experience and feedback gained during the testing process, so as to improve future regulatory efficiency and effectiveness.
"Sandbox" participants need to comply with relevant terms and regulations, and the HKMA can terminate the qualification of participants in the event of any non-compliance with the "Sandbox" requirements. It should be emphasized that successfully becoming a "Sandbox" participant does not mean that the HKMA or other financial regulatory authorities have obtained any recognition or supervision. "Sandbox" participants who intend to apply for a license in the future must still submit a separate application to the HKMA in accordance with the regulatory system to be implemented in the future.
The HKMA has also noted that the number of fraud cases involving virtual assets has been on the rise in recent years. In order to prevent fraudsters from passing off fakes as real, applicants should not disclose their application status to the public before being allowed to enter the "Sandbox". Participants who are allowed to enter the "Sandbox" need to obtain the consent of the HKMA before they can announce it to the public. The HKMA will publish and update the list of "Sandbox" participants on its website in a timely manner to facilitate the public to understand the latest participation in the "Sandbox". If there is a suspected false or misleading announcement, the HKMA may refer it to the law enforcement agency for follow-up and will notify the public through various channels.
Source: Today's Economic Times