The Hong Kong Monetary Authority (HKMA) reported that algorithmic stablecoins will not be allowed in the country as it prepares to introduce a tightened new regulatory framework for cryptocurrencies and stablecoins.
A report submitted by the HKMA on Jan. 31 on new regulations for cryptocurrencies and stablecoins important details come to light output. For stablecoins by 2024 at the latest Stating that mandatory licenses will be requested, HKMA stated that algorithmic stablecoins will not be allowed within the country.
HKMA those decisions Binanceas well as Hong Kong’s largest metaverse company Animoca Brandsone of China’s leading Ali Dadpayment giants MasterCard and Visa based on the feedback of 58 different authorized institutions, including the leading names of the industry.
The new decisions taken will be implemented in 2023 and 2024 with the amendments to be made in the existing laws or a new legislation. The new licensing requirement will be mandatory both for issuers that operate directly in Hong Kong and for companies that actively market their products to the public.
With this mandatory license to be brought, HKMA aims to ensure that stablecoin issuers hold fiat reserves matching the amount of crypto in circulation and stabilize projects in the first stage.
While the report emphasizes that stablecoins should always be held collateral, Terra (Luna) leading to the collapse TerraUSD (UST) like It was underlined that algorithmic stablecoins will not be allowed at all.
Reserve assets must be of high quality and highly liquid. Stablecoins that derive their value based on arbitrage or algorithm will not be accepted.