The Hong Kong Monetary Authority today released its January 2022 Discussion Paper on Crypto-assets and Stablecoins. While acknowledging the potential benefits that these innovations bring, especially stablecoins, the authority is keen to see the application of appropriate regulation.

When treating crypto-assets in general, the Discussion Paper highlights that going forward there are dangers, and warns of a:

“growing interconnectedness between these largely unregulated crypto-assets with the mainstream financial system and the potential risks that a severe price correction in these assets could pose to the wider financial system.”

On stablecoins, there appears to be more of a predisposition to acceptance, and the Paper notes that there is the possibility that they may become more widely used as they gain traction.

“some stablecoins may be more readily developing into a commonly acceptable means to store value and/or make payments, thus having a higher potential for being incorporated into the mainstream financial system across the globe.”

Although it is also noted that payment-related stablecoins would first have to be appropriately regulated before being allowed to operate in Hong Kong or be marketed to the public.

The report notes the upward trend in the global market cap for crypto-assets, especially since the onset of the pandemic.

While it is believed that crypto-assets have a “limited share in global financial assets and adoption by the general public of Hong Kong, they are evolving rapidly.”

The Paper goes on to discuss the possible regulatory measures that might be adopted, ranging from a market driven “no action”, through various other policy options that include more and tougher regulation, until the final option, which is a “blanket ban”.

Major international organisations are referenced, such as the Basel Committee on Banking Supervision, the FATF, and the FSB, and the report briefly highlights what they are currently advising.

In addition, the Paper covers how the major global jurisdictions are dealing with the issue of crypto-assets. China, the EU, Singapore, the UK, and the US have their positions laid out.

After covering the risks entailed by stablecoins, the Paper concludes that crypto-assets haven’t yet posed material risks to financial stability, but noted that given the pace of their development, risks could soon begin to materialise.

The authors of the Paper concluded:

“bringing crypto-assets within the regulatory perimeter in an appropriate manner would help address the various risks posed to users and the financial system while embracing the potential benefit of financial innovations.”


“The HKMA is of the view that adopting a risk-based approach would be the most suitable way to take things forward.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.