Hong Kong Seeks Feedback on ‘Risk-Based’ Approach to Crypto, Stablecoin Regulation

Hong Kong’s central bank is seeking public feedback on its intended regulation of payment-related stablecoins.


Hong Kong Monetary Authority. Front entrance of Two IFC skyscraper, Hong Kong. Credit: Shutterstock


key takeaways

  • The Hong Kong Monetary Authority is seeking feedback from the public on how it should regulate cryptocurrencies and stablecoins
  • The banking authority is considering a risk-based approach to payments-related stablecoins, which it deems as a risk to financial stability

Hong Kong’s central bank is seeking feedback from the public on new regulatory measures aimed at curbing what it calls “material risks to financial stability” posed by cryptocurrencies and stablecoins.

The Hong Kong Monetary Authority (HKMA), the country’s central banking institution, released its discussion paper on Wednesday outlining its stance “in the face of growing adoption” of the nascent asset class.

The paper claims the current market size and trading activity, from a systemic viewpoint, does not pose “an immediate threat” to the global financial system.

The bank does recognize, though, the increase in institutional adoption of crypto — as an alternative or complement to that of traditional asset classes — represents an intensifying bond with mainstream finance.

In May 2021, Hong Kong announced it would be implementing a licensing regime aimed at virtual asset service providers, or VASPs, by amending its existing anti-money laundering and counter-terrorism laws.

Those changes are in line with the intergovernmental agency Financial Action Task Force’s (FATF) request that financial entities and crypto business services dealing in crypto be regulated under a “risk-based approach.”

It is from the FATF that Hong Kong is drawing up further regulatory measures while seeking to balance financial innovation against regulating illicit activity, per the paper.


HKMA’s concerns mainly center on “payments-related stablecoins,” which it deems a risk that if left unchecked has the potential to severely undermine public confidence in its ability to monitor and regulate.

Stablecoins are types of cryptocurrencies whose values are generally pegged to certain commodities, such as gold or traditional currencies like the US dollar. Their use for payments within certain circles has continued to grow since their inception in 2014 and began being picked up in earnest by late 2017. There are $172 billion in stablecoins circulating today, according to CoinGecko.

“The rapid development of crypto-assets, particularly stablecoins, is a topic of keen attention in the international regulatory community as it presents possible risks regarding monetary and financial stability,” said HKMA’s chief Eddie Yue in a statement on Wednesday.

The bank’s paper identifies ten major areas of concern stablecoins pose, including disrupting payment integrity, banking stability, creating a currency substitution and causing settlement risks, among others.

In response, HKMA will seek to “apply regulation to tackle the key risks” that it classifies as being posed by these types of crypto assets and is now seeking to gauge public feedback.

“We look forward to hearing the feedback from stakeholders and will draw up a risk-based, pragmatic and agile regulatory regime on this front,” said Yue.

Members of the public and the industry have been invited to submit their responses by email no later than March 31.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png


Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.



Do Kwon may miss the start of the March 25 trial in the SEC’s case against the former executive and Terraform Labs


Riot Platforms bought 31,500 more mining machines while CleanSpark has begun operating in Mississippi


Dencun was activated on all testnets, a blog post Tuesday said


Hut 8 also announced it broke ground on a Texas mining site


Uniswap aims to become a “complete platform for swapping” following its latest product releases


Continued demand for bitcoin ETFs coupled with greater demand for bitcoin from exchanges is contributing to price moves, analysts say