Hong Kong’s central banking institution, the Hong Kong Monetary Authority (HKMA), released a questionnaire to gauge public opinion on regulations for crypto-assets and stablecoins. The state-backed regulator intends to establish a regulatory framework by 2023-24.

HKMA’s “Discussion Paper on Crypto-assets and Stablecoins” highlights the explosive growth of the stablecoin market in terms of market capitalization since 2020 and the concurrent regulatory recommendations put forth by international regulators including the United States’ Financial Action Task Force (FATF), the Financial Stability Board (FSB) and The Basel Committee on Banking Supervision (BCBS).

Market Capitalization of Crypto-assets. Source: HKMA

According to the HKMA, the current size and trading activity of crypto-assets may not pose an immediate threat to the stability of the global financial system from a systemic point of view. However, the discussion paper warned:

“The growing exposure of institutional investors to such assets as an alternative to or to complement traditional asset classes for trading, lending and borrowing […] indicate growing interconnectedness with the mainstream financial system.”

Market Capitalization of Major Stablecoins. Source: HKMA.

Based on the above figure, HKMA’s paper shows that the global market capitalization stood at about $150 billion in December 2021, “representing about 5% of the overall crypto-asset market.” The regulator has also shared a list of eight questions to seek policy-related recommendations citing five possible regulatory outcomes — no…


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