Hong Kong’s Central Bank Initiates Regulatory Sandbox for Stablecoin Issuers

The central bank of Hong Kong has launched a regulatory sandbox, inviting businesses keen on issuing fiat-backed stablecoins to participate.

This initiative aims to help shape the regulatory framework for cryptocurrencies pegged to real currencies. The Hong Kong Monetary Authority (HKMA) has established the sandbox to provide potential stablecoin issuers with an environment to develop and test certain operations without facing penalties.

The sandbox offers regulatory flexibility and is in line with Hong Kong’s efforts to regulate fiat-backed stablecoins, which are digital currencies pegged to the value of sovereign currencies such as the U.S. or Hong Kong dollar, the regulator announced on Tuesday.

According to the HKMA notice, “Applicants should demonstrate genuine interest in establishing a stablecoin issuance business in Hong Kong with a viable business plan, and their proposed activities under the sandbox arrangement will be conducted within defined parameters and in a risk-controlled manner.”

In December, the regulatory authorities in the jurisdiction began soliciting public feedback on their regulatory proposals for stablecoins, which include the requirement for issuers to obtain licenses to operate in Hong Kong.

“The HKMA aims to utilize the sandbox framework to communicate supervisory expectations to parties interested in issuing fiat-referenced stablecoins in Hong Kong, and to gather feedback from participants regarding the proposed regulatory measures,” the notice stated.