Comparison Analysis of Stablecoin Legislation and Regulation: Hong Kong and the United States

Stablecoins, as a new type of financial product, have recently attracted high attention from regulatory agencies in various countries. On May 21, Hong Kong passed the "Stablecoin Regulation Draft", and almost simultaneously, the U.S. Senate passed the "Stablecoin Uniform Standards Protection Act". These two legal documents provide specific regulations regarding the definition and regulatory framework of stablecoins, making them worthy of in-depth analysis and comparison.

I. Main Contents of the Hong Kong Stablecoin Regulation Draft

The "draft" in Hong Kong clearly defines stablecoins, including the following aspects:

1. Presentation format: expressed in the form of valuation units or economic value storage.

2. Scope of application: used for payment, debt settlement, investment, and trading, etc.

3. Storage and transfer method: Operate electronically on a distributed ledger.

4. Value Foundation: Pegged to a single asset or a basket of assets.

In terms of regulatory requirements, the "draft" stipulates:

1. The issuing entity must be a company with a minimum capital of 25 million HKD.

2. Reserve asset requirements: The market value must not be lower than the face value of the unredeemed stablecoins, must be isolated from the company's other funds, and must be high-quality liquid assets.

3. Risk management requirements: timely fulfillment of payments, establishment of KYC/AML systems, etc.

4. Information Disclosure: Regular audits and public disclosure of reserve asset details.

5. Other restrictions: No interest payments, only able to conduct stablecoin business, etc.

Overall, Hong Kong aims to provide innovative payment tools for the new economy while mitigating risks.

2. Main Content of the U.S. "Stablecoin Uniform Standards Guarantee Act"

The "bill" in the United States and the "draft" in Hong Kong are generally similar in regulatory logic, but there are also some differences:

Similarities:

1. Pegged to fiat currency, used for payment settlement.

2. 100% reserve requirement, supported by high-quality assets.

3. Regular disclosure of reserve asset reports and third-party audits.

4. Anti-money laundering and KYC requirements.

5. No interest payments allowed.

Main differences:

1. The regulatory framework is divided into two levels: those with a market value exceeding 10 billion USD are federally regulated, while those below 10 billion USD may choose state-level regulation.

2. More specific requirements for reserve asset types.

3. Establish a dedicated "stablecoin certification review committee".

Overall, both local legislations will legalize local currency stablecoins and include them in regulation, promoting innovation while preventing risks.

3. Comparison of Stablecoins and Traditional Payment Tools

Stablecoins are essentially very similar to traditional payment instruments such as bank notes:

1. Customers exchange an equivalent amount of currency for payment tools.

2. Can be used for payments, debt repayment, cash exchange, etc.

3. The issuer pays the equivalent currency on sight.

4. Address the inconvenience of carrying physical cash.

However, stablecoins also have their unique characteristics:

1. Based on new technologies such as blockchain.

2. Mainly applied in the emerging digital economy field.

3. Continuous network operation and other technical support are required.

4. There may be new risks, such as run risks, etc.

Therefore, stablecoins, as a new type of payment tool, need to draw on traditional regulatory experiences while also formulating new regulatory rules tailored to their characteristics.

4. Analysis of the Demands of Stablecoin Stakeholders

The success of stablecoins needs to meet the interests of all relevant parties:

Payer:

• Faster, more convenient, and safer than fiat currency
• 1:1 exchange, no additional cost
• The cost of use is lower than that of fiat currency.

Recipient:

• Easy to accept, conducive to transactions
• Can be exchanged 1:1 for fiat currency
• Can be used in other payment scenarios

Issuer:

• Obtain reasonable returns such as exchange fees, reserve asset investment income, etc.
• Pursuing economies of scale

Technical Support Party:

• Obtain corresponding rewards

Regulators:

• Promote economic growth
• Maintain financial stability
• Preventing risks

Only when the demands of all parties are balanced can stablecoins achieve widespread application. Currently, stablecoins mainly play a role in specific areas of the digital economy, but their application scope is continuously expanding and requires appropriate regulatory management.

5. The Impact of Stablecoins on Monetary Policy

As a type of currency, stablecoins will affect the money supply and circulation:

1. If all reserve assets are used for lending, it is equivalent to injecting an equal amount of currency into the market.

2. If part of the reserve assets is invested in government bonds, it will increase the issuance of some currency.

3. If the reserve assets are 100% backed, then there will be no increase in currency issuance.

4. Stablecoins are based on distributed ledgers and may have different circulation patterns compared to traditional cash.

5. In terms of cross-border payments, stablecoins need to be integrated with the banking system in order to facilitate currency conversion.

Therefore, the issuance scale and regulatory model of stablecoins must be incorporated into monetary policy considerations. At the same time, stablecoin regulation also needs to pay attention to the connection with the banking system.

6. Suggestions for China

1. Adhere to technological neutrality and encourage financial innovation.

2. Recognize that stablecoins arise from real demand and serve emerging economic sectors.

3. Formulate regulations for stablecoins to promote innovation while preventing risks.

4. Consider incorporating the Renminbi stablecoin into existing bill management or separate legislation.

5. Issue RMB stablecoin to expand application scenarios for digital RMB.

6. Innovate stablecoin payment systems to achieve seamless integration with bank accounts.

7. The development of the Renminbi stablecoin should aim to serve the real economy and the internationalization of the Renminbi, rather than simply competing with the US dollar stablecoin.

In summary, stablecoins are a product of financial innovation. China should actively respond, seeking a balance between promoting innovation and controlling risks, to serve the development of emerging economies and the internationalization of the RMB.