The People’s Bank of China Highlights Global Efforts to Regulate Digital Assets
The People’s Bank of China (PBOC), the country’s central bank, has emphasized global efforts to regulate digital assets in its annual financial stability report for 2024. The report also mentions that Hong Kong is “actively exploring” a digital asset licensing regime.
Global Regulation of Digital Assets
The China Financial Stability Report, released on December 27, revealed that 51 jurisdictions globally have issued bans or restrictions on digital assets. Some economies, such as Switzerland and the United Kingdom, have adjusted existing laws, while others, like the European Union, have enacted new legislation such as the Markets in Crypto Assets Regulation (MiCAR).
Digital Asset Regulation in China
In September 2021, the PBOC, along with nine other Chinese regulators, issued a notice that effectively banned digital assets in the country. The notice declared that digital assets are not legal tender, and trading in them is illegal, with severe penalties for entities and individuals involved in such activities.
Despite the ban in mainland China, Hong Kong allows the trading of digital assets.
Digital Asset Licensing Regime in Hong Kong
In June 2023, Hong Kong introduced a digital asset licensing regime for trading platforms, allowing licensed exchanges to offer retail trading services. Recently, in August 2024, the Hong Kong Legislative Council announced plans to enhance digital asset regulations within the next 18 months.
The Hong Kong government aims to improve supervision and enforcement of legislation related to digital asset financial products, including stablecoins. Sandbox tests have been conducted to determine the best approach for this impending legislation.
International Regulatory Framework
The PBOC is working on improving an international regulatory framework for digital assets, as recommended by the Financial Stability Board (FSB). The central bank acknowledges that cryptocurrencies may pose risks in some economies as their use in payments and retail investments increases.
Major financial institutions in Hong Kong, such as HSBC and Standard Chartered Bank, are required to include digital asset transactions in their routine customer supervision.
Overall, the PBOC is focused on enhancing the regulatory environment for digital assets and ensuring financial stability in the face of evolving digital asset technologies.
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