Stablecoins and Financial Operations
In a recent discussion at the Lujiazui Forum, Christopher Hui, the Financial Secretary and Director of the Treasury Bureau for the Hong Kong Special Administrative Region, emphasized the fundamental role that stablecoins could play in the financial landscape. Rather than merely serving as a technological advancement or a means to enhance interoperability, Hui insisted that the primary objective of stablecoins should be to address key issues within economic operations, thereby returning to the core principles of finance.
Regulatory Framework for Stablecoins
Hui elaborated on the regulatory framework for stablecoins, indicating that the guidelines would resemble those governing traditional financial institutions. He outlined several critical requirements for stablecoin issuers:
- Adequate capital must be maintained.
- The reserve fund tied to unredeemed stablecoins must consistently equal or exceed the value of the currency backing them.
- Any conversion by stablecoin holders back to the base currency should be executed within a single business day.
International Use of the Chinese Yuan
When questioned on whether stablecoins could play a role in promoting the international use of the Chinese Yuan, Hui did not dismiss the possibility. He noted that Hong Kong’s regulatory framework is straightforward, stipulating that laws permit stablecoins to be linked to various legal currencies. However, he cautioned that such a move would necessitate a thorough examination of the potential impacts on the nation’s exchange rate and broader monetary policy.
Despite having some legal flexibility, he stressed that decision-making in this regard must take into account the associated risks and benefits comprehensively.
