Introduction
On September 8, the Hong Kong Monetary Authority (HKMA) launched a public consultation on a new classification framework for cryptocurrencies as part of their Banking Sector Regulation Policy Manual (SPM). This new module, identified as CRP-1, seeks to provide clearer regulatory guidance aligned with upcoming banking capital requirements based on the Basel Committee’s standards for cryptocurrency, which are anticipated to come into effect in early 2026.
Proposed Regulations
The proposed regulations will categorize cryptocurrencies into two primary groups, further segmented into sub-groups:
- Group 1:
- Group 1a: Tokenized versions of traditional assets
- Group 1b: Stablecoins characterized by an effective stabilization mechanism
- Group 2: Cryptocurrencies that lack any reserves, including well-known digital currencies like Bitcoin and Ethereum, alongside tokenized assets and stablecoins that fail to meet the necessary classification standards.
Further Differentiation
Group 2 will be further differentiated based on a defined set of hedging criteria, dividing it into:
- Group 2a: Allows for limited recognition of hedging
- Group 2b: Assigned to unrecognized hedging approaches
These classifications aim to facilitate banks’ adaptation to a more robust regulatory landscape concerning digital assets, particularly in embracing compliant stablecoins and managing associated risks accordingly.
Conclusion
This initiative reflects Hong Kong’s commitment to enhancing its regulatory framework for cryptocurrencies, offering clearer guidance to financial institutions as they navigate the evolving landscape of digital finance.
