Article reprinted from: WOO
Author: WOO
In recent years, the rapid development of stablecoins has attracted the attention of regulatory authorities in various countries. As a type of cryptocurrency pegged to fiat currencies or other assets, stablecoins possess the characteristic of value stability and have been widely used in cross-border payments, DeFi, and other fields. Particularly in this cycle, RWA has performed brilliantly, with both traditional financial investment institutions (such as BlackRock) and web 3 organizations (such as Sky, formerly Maker DAO) entering the space, leading to increasing attention from investors in this track. A trend of oscillating upward is gradually forming.
Image source: https://defillama.com/stablecoins
"Without rules, nothing can be achieved," and consequently, governments and international organizations have begun to introduce policies to regulate stablecoins. This article provides a brief summary of the current regulatory dynamics.
United States (North America)
The United States is one of the major markets for stablecoin development, and its regulatory policies are quite complex. The stablecoin regulatory framework in the U.S. is implemented by multiple agencies, including the Treasury Department, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).
For certain stablecoins, the SEC may consider them to have securities attributes, requiring compliance with relevant provisions of (Securities Law). The Office of the Comptroller of the Currency (OCC), under the Treasury Department, had proposed allowing national banks and federal savings associations to provide services to stablecoin issuers, but they must comply with anti-money laundering and compliance requirements. Recently, the U.S. Congress is discussing legislative proposals such as the (Stablecoin Transparency Act), attempting to establish a unified regulatory framework for stablecoins. After the election of Trump, known as the 'crypto president', although policies have not yet been introduced, crypto regulation seems to be overall improving.
European Union (Europe)
The EU's stablecoin regulation mainly relies on the (Regulation on Markets in Crypto-Assets) (MiCA).
MiCA classifies stablecoins into Asset-Referenced Tokens (ART) and Electronic Money Tokens (EMT). Electronic Money Tokens (EMTs) refer to tokens pegged to a single fiat currency, such as stablecoins pegged to the Euro or the U.S. Dollar. Asset-Referenced Tokens (ARTs) refer to tokens pegged to certain assets (such as fiat currencies, commodities, or crypto assets). MiCA sets corresponding regulatory requirements. Entities issuing stablecoins must obtain permission from EU member states and meet requirements such as capital reserves and transparency disclosures.
Hong Kong (Asia)
On July 17, 2024, the Hong Kong Monetary Authority and the Financial Services and the Treasury Bureau jointly released a consultation summary introducing the main content of the upcoming stablecoin regulatory system. According to this system, companies wishing to issue or promote fiat stablecoins to the public in Hong Kong must first obtain a license from the Monetary Authority. This set of regulatory requirements includes the management of reserve assets, corporate governance, risk control, information disclosure, and combating money laundering and terrorist financing.
Image source link: https://www.hkma.gov.hk/gb_chi/news-and-media/press-releases/2024/07/20240717-3/
In addition, the Monetary Authority has also launched a 'sandbox' program for stablecoin issuers to exchange opinions with the industry on the proposed regulatory requirements. The list of the first participants was announced on July 18, 2024, including JD Coin Chain Technology (Hong Kong) Limited, Round Coin Innovation Technology Limited, and a consortium composed of Standard Chartered Bank (Hong Kong) Limited, Animoca Brands Limited, and Hong Kong Telecommunications Limited.
Image source: https://www.hkma.gov.hk/gb_chi/key-functions/international-financial-centre/stablecoin-issuers/
Recently, on December 6, 2024, the government published the (Stablecoin Regulation Draft) in the Gazette, aiming to introduce a regulatory system for fiat stablecoin issuers in Hong Kong to improve the regulatory framework for virtual asset activities.
Singapore (Asia)
According to Singapore's (Payment Services Act), stablecoins are regarded as a type of digital payment token, and their issuance and circulation require permission from the Monetary Authority of Singapore (MAS). MAS provides a regulatory sandbox for startups to test business models related to stablecoins.
Japan (Asia)
In June 2022, Japan revised the (Payment Services Act) (PSA) to establish a regulatory framework for the issuance and trading of stablecoins. According to the revised PSA, stablecoins fully backed by fiat currencies are defined as "Electronic Payment Instruments" (EPI) and can be used to pay for goods and services. There are specific requirements for issuing entities, namely, only three types of institutions can issue stablecoins: banks, money transfer service providers, and trust companies. Institutions wishing to engage in stablecoin-related business must first register as Electronic Payment Instrument Service Providers (EPISP) to obtain the necessary licenses to provide services.
Brazil (South America)
BCB President Roberto Campos Neto stated in October 2024 that he plans to regulate stablecoins and asset tokenization in 2025. In November 2024, BCB proposed a regulatory proposal suggesting prohibiting users from withdrawing stablecoins from centralized exchanges to self-custody wallets. It is reported that in December, BCB's Deputy Head of Financial System indicated that if key issues such as transaction transparency could be improved, the central bank might lift the ban.
Summary
Additionally, the BRICS countries, including Russia, are also considering using cryptocurrencies as a means of settlement for cross-border financing. Overall, whether setting up regulatory sandboxes for crypto companies or defining categories based on different characteristics of stablecoins, there will be increasingly more regulatory policies for stablecoins in the future. Cross-border payments also seem to become one of the most widely used scenarios for stablecoins.
