Hong Kong Monetary Authority (HKMA), the de facto central bank of the city-state has issued a discussion paper on crypto-assets and stable coins yesterday (January 12), inviting views from the industry and public on the relevant regulatory approach. According to the FSB and the BIS, stable coins are defined as “a crypto-asset that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets” and “cryptocurrencies with values tied to fiat currencies or other assets” respectively. The authority plans to have a new regulatory regime for crypto assets ready by July. The central bank is seeking feedback from stakeholders and investors by March 31, 2022. The authority proposes to implement a risk-based approach to devise the regulations Hong Kong is competing with Singapore to become the Asian hub for the rapidly expanding industry. The authority earlier launched ‘Project LionRock’, to explore the possibility of a “wholesale CBDC” a digital currency for settlement between banks. The HKMA partnered with the Bank of Thailand (BOT) to explore a Distributed Ledger Technology (DLT) solution for cross-border funds transfers. Last October, the monetary authority also published a whitepaper calling for views from experts on the prospect of an electronic Hong Kong dollar (e-HKD). Mainland China is already testing CBDC on a pilot basis. The HKMA is currently seeking comments from the stakeholders of the crypto industry from three dimensions: what types of stable coin-related activities should fall under the regulatory ambit; what kind of authorization and regulatory requirements would be envisaged for those entities subject to the new licensing regime; Should HKMA also have the plan to regulate unbacked crypto-assets given their growing linkage with the mainstream financial system and risk to financial stability. Currently, Hong Kong has a voluntary licensing framework for platforms that offer to trade of securities-type VAs or tokens. In particular, the voluntary opt-in regime is applicable to only platforms that offer trading services of at least one virtual asset with securities features involved. Platforms solely trading non-securities virtual assets are not covered. The first licence under this regime was issued to a platform operator in December 2020, while other applications are currently under consideration. Last year, the Financial Services and the Treasury Bureau (FSTB) has also completed the public consultation on the introduction of a licensing regime for Virtual Asset Service Providers (VASP) under the existing anti-money laundering law, and the consultation conclusion was published in May 2021. Under the VASP regime, it was proposed that the business of operating a virtual asset exchange be designated as a regulated activity, whereby any person seeking to engage in this regulated activity needs to obtain a licence. At the initial stage, the proposed regime will only apply to exchanges dealing in virtual assets, but not other types of VASPs such as crypto wallet providers or custodians.