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Hong Kong is cracking down on %Stablecoins as it strengthens regulations pertaining to %Cryptocurrencies and other digital assets.

Regulators in the Chinese territory of Hong Kong say they plan to make licenses for stablecoins mandatory going forward and will ban all algorithmic stablecoins.

Moving forward, organizations will have to obtain a license to operate stablecoin services on Hong Kong exchanges.

The Hong Kong Monetary Authority (%HKMA) outlined its regulatory plans after receiving feedback on a discussion paper published last year. Based on the 58 responses it received, the regulator said it will set up a regime to supervise stablecoins.

Stablecoins are cryptocurrencies whose value is pegged to other assets such as the U.S. dollar or the price of gold.

The HKMA said it plans to supervise the governance, issuance, and stabilization of fiat-backed stablecoins, for which issuers must maintain reserves matching the amount of crypto in circulation.

Stablecoin reserves have come under regulatory scrutiny around the world since 2021, when the issuer of the top stablecoin by market capitalization, Tether, revealed that much of its reserves were made up of unsecured short-term debt.

Regulators in the U.S., European Union, and Japan are also working on new regulations aimed at governing stablecoins.

%TerraUSD, an algorithmic stablecoin whose value was supposed to be maintained through links to the U.S. dollar, collapsed in May 2022, sending shockwaves throughout the global cryptocurrency sector.


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