EXECUTIVE SUMMARY

The FTAHK commends the HKMA and the FSTB in their respective efforts to further the regulatory regime around the use of virtual assets in Hong and is generally supportive of the approach suggested in the proposals.

We do, however, feel that there are certain areas in which additional regulation clarity would be beneficial to the market in the move towards regulation and assist in greater adoption of regulated stablecoins by the public, including:

• whether stablecoins designed for the wholesale, corporate or trade sectors fall within the proposed scope of regulation;
   
• when looking at the reference asset for a stablecoin, a clearer understanding of what the HKMA and FSTB would consider an “asset” under the proposed legislation;
   
• in respect of the proposed licensing regime, what the expectations are of the HKMA in terms of (a) local presence; and (b) governance, knowledge, and experience, as well as generally around token management and wallet management.

Additionally, we note that the role of intermediaries has not been fully addressed by the HKMA and FSTB, and we would recommend expansion of the proposed scope to include them as an additional means of protecting the public. It is the FTAHK’s views that stablecoin transactions are more likely than not to involve intermediaries, as the issuer of a stablecoin may focus its obligations on the minting and burning of stablecoins, versus engaging directly with end-users.

The FTAHK welcomes the opportunity to engage directly with the HKMA and the FSTB in dialogue on these issues and assist in the development of a broad and cohesive regulatory framework around virtual assets.

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