A regulatory sandbox was established by the Hong Kong Monetary Authority (HKMA) to provide prospective stablecoin issuers with a penalty-free environment in which to develop and test certain operations.
The regulator stated on Tuesday that the sandbox gives regulatory flexibility and is in line with Hong Kong’s strategy to control fiat-backed stablecoins, or cryptocurrencies linked to the value of sovereign currencies like the US or Hong Kong dollar.
“Applicants should have genuine interest in developing a stablecoin issuance business in Hong Kong with a reasonable business plan, and their proposed operations under the sandbox arrangement will be conducted within a limited scope and in a risk-controllable manner,” the notice from the HKMA stated.
The authorities in the region began soliciting feedback from the general public in December over their proposed stablecoin regulations, which included requiring licences for issuers to conduct business in Hong Kong.
“The HKMA wishes to leverage the sandbox arrangement to communicate supervisory expectations to parties interested in issuing fiat-referenced stablecoins in Hong Kong, as well as to obtain feedback from participants on the proposed regulatory requirements,” the notification stated.