The FSC issues draft Guidance Notes on Stablecoins for public consultation
On 24 July 2023, the Financial Services Commission (FSC) issued the draft Guidance Notes on Stablecoins (the “draft Guidance Notes”) for public consultation. The public and stakeholders of the industry are invited to submit their comments to the FSC by 11 August 2023.
Ultimately the objective of the Guidance Notes, when finalized and adopted, will be to inform the public and stakeholders about the regulatory policy of the FSC on Stablecoins following the enactment of the Virtual Asset and Initial Token Offerings Services Act (“VAITOS Act”).
It will be recalled that a stablecoin is a type of virtual asset that relies on stabilisation tools to maintain a stable value relative to one or several fiat currencies or other reference asset. Stablecoin designs generally reflect 2 broad types of mechanisms: asset-linked and algorithmic, with some approaches being a hybrid of the two. Asset-linked stablecoins are considered to be less risky for their value hinges on physical/financial assets while algorithmic stablecoins are riskier in nature as they attempt to maintain a stable value via protocols that provide for the increase or decrease of the supply of the stablecoins in response to changes in demand.
To access the draft Guidance Notes, please click Here