On Wednesday, Hong Kong's de facto central bank invited comments on ways to regulate crypto assets and stablecoins, with the goal of adopting a regulatory framework by 2024 that might range from no action to a blanket ban.
The rapid growth of cryptocurrencies, particularly stablecoins, or digital assets pegged to existing currencies, has piqued the interest of regulators throughout the world, who are concerned that they could endanger the financial system if not closely managed.
According to Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA), the global market value of crypto assets is around $2.2 trillion, indicating their growing interconnectedness with the conventional financial system.
"We emphasise issues that may influence the public's confidence in, and the safety, efficiency, and soundness of, our payment systems, and accord appropriate priority to user protection," the HKMA stated in a report.
It is soliciting public and stakeholder feedback by March 31, in a broader effort than a prior exercise by the territory's Securities and Futures Commission (SFC), which focused solely on trading platforms for virtual assets.
The HKMA's report focused on the broader implications of stablecoins that may be used in payments, as well as aspects of investor protection relating to crypto assets and the interface of regulated institutions with crypto assets.
It outlined five options for regulating crypto assets, ranging from no action to a complete ban.
Before establishing relationships with providers of crypto asset services, regulated institutions must "critically examine" their exposure to various kinds of risks and implement risk-mitigation measures, according to the report.