Hong Kong’s Legislative Council has passed the long-anticipated Stablecoins Bill, establishing a licensing regime for fiat-referenced stablecoin (FRS) issuers. This legislative move, announced by the Hong Kong government on May 21, aims to strengthen regulatory oversight on virtual asset activities, fostering both financial stability and innovation in the region.
Ordinance To Regulate Stablecoin Advertisements And Issuers
The newly enacted Stablecoins Ordinance mandates that any entity issuing an FRS within Hong Kong, or any FRS claiming to maintain a stable value against the Hong Kong dollar, must obtain a license from the Monetary Authority (MA).
The licensing requirements will focus on several critical areas, including reserve asset management, proper segregation of client assets, and a robust stabilization mechanism. Additionally, issuers must ensure they can process redemption requests for stablecoin holders at par value under reasonable conditions.
According to the government’s statement, these regulations are designed to enhance public protection and safeguard investors. Under the Ordinance, only licensed institutions will be permitted to offer FRS in Hong Kong, and retail investors will only have access to FRS issued by these licensed entities.
To combat fraud and scams, the Ordinance stipulates that only advertisements for licensed fiat-referenced stablecoin issuances will be allowed, ensuring that the public is shielded from misleading promotional materials.
Hong Kong’s Commitment To Digital Assets
Mr. Christopher Hui, Secretary for Financial Services and the Treasury, emphasized that the Ordinance follows the principle of “same activity, same risks, same regulation.”
This risk-based approach aligns with international regulatory standards and aims to create a solid foundation for Hong Kong’s digital asset market, ultimately promoting sustainable industry development while protecting user rights.
Echoing these sentiments, Mr. Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, highlighted the Ordinance’s pragmatic and flexible nature. He noted that a robust regulatory framework would foster healthy, responsible growth within Hong Kong’s stablecoin and broader digital asset ecosystem.
The Stablecoins Ordinance is expected to come into effect later this year, allowing the industry ample time to familiarize itself with the new licensing requirements. Transitional arrangements will also be provided to assist businesses in applying for licenses and adjusting to the regulatory landscape.
Looking ahead, the Hong Kong government remains committed to nurturing the virtual asset sector. Following the establishment of the regulatory regime for trading platforms and stablecoin issuers, the government plans to initiate consultations on over-the-counter (OTC) and custodian services for digital assets, along with releasing a second policy statement on crypto development.
Featured image from DALL-E, chart from TradingView.com
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