Article source: WOO
Author: WOO
In recent years, the rapid development of stablecoins has attracted the attention of regulatory authorities in various countries. Stablecoins, as a type of cryptocurrency pegged to fiat currencies or other assets, have stable value characteristics and are widely used in cross-border payments, DeFi, and other fields. Especially in this cycle, RWA has shown outstanding performance, with both traditional financial investment institutions (such as BlackRock) and web3-based institutions/organizations (such as Sky, formerly MakerDAO) entering the market, and more investors are paying attention to this sector, gradually forming a trend of oscillating upward.
Image source: https://defillama.com/stablecoins
‘Without rules, there can be no order,’ 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 main markets for stablecoin development, and regulatory policies are relatively complex. The U.S. stablecoin regulatory framework is mainly implemented by multiple agencies, including the Treasury, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).
For certain stablecoins, the SEC may consider them to have securities characteristics and require compliance with the 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 for 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) in an attempt to establish a unified regulatory framework for stablecoins. After the election of Trump, known as the 'Crypto President,' although policies have not yet been implemented, cryptocurrency regulation seems to be overall improving.
European Union (Europe)
The EU's stablecoin regulation mainly relies on the (Cryptocurrency Asset Market Regulation) (MiCA).
MiCA categorizes stablecoins into Asset-Referenced Tokens (ARTs) and Electronic Money Tokens (EMTs). Electronic Money Tokens (EMTs) refer to tokens pegged to a single fiat currency, such as stablecoins pegged to the euro or U.S. dollar. Asset-Referenced Tokens (ARTs) refer to tokens pegged to certain assets (such as fiat currencies, commodities, or crypto assets). MiCA establishes corresponding regulatory requirements. Entities issuing stablecoins must obtain permission from EU member states and meet requirements for capital reserves, transparency disclosures, and more.
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-backed 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 measures to combat 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 launched a ‘sandbox’ program for stablecoin issuers to exchange views with the industry on the proposed regulatory requirements. The first batch of participants was announced on July 18, 2024, including JD Coin Chain Technology (Hong Kong) Limited, Yuan Coin Innovation Technology Limited, and a consortium formed by Standard Chartered Bank (Hong Kong) Limited, Animoca Brands Limited, and Hong Kong Telecom 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 Regulatory Draft) in the gazette, aimed at introducing a regulatory framework for fiat-backed 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 considered a type of digital payment token, and their issuance and circulation must be licensed by the Monetary Authority of Singapore (MAS). MAS provides regulatory sandboxes 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 currency are defined as 'Electronic Payment Instruments' (EPI) and can be used to pay for goods and services. There are specific requirements for the issuing entities, namely: only three types of entities can issue stablecoins: banks, money transfer service providers, and trust companies. Entities wishing to engage in stablecoin-related businesses must first register as Electronic Payment Instrument Service Providers (EPISP) to obtain the necessary licenses to provide services.
Brazil (South America)
Roberto Campos Neto, President of BCB, stated in October 2024 that they plan 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-custodial wallets. It is reported that in December, the Deputy Head of the BCB Financial System indicated that if key issues such as transaction transparency can be improved, the central bank might lift the ban.
Summary
In addition, the BRICS nations in Russia are also considering using cryptocurrencies as a means of cross-border financing. Overall, whether it is setting up regulatory sandboxes for crypto companies or defining categories based on the different characteristics of stablecoins, more and more regulatory policies for stablecoins will be enacted in the future. Cross-border payments also seem to be one of the most widely applied scenarios for stablecoins.