Hong Kong has taken a significant step towards regulating fiat-backed stablecoins with the passing of a groundbreaking bill. This move reaffirms the city’s commitment to establishing itself as a global center for digital finance.
According to Hong Kong lawmaker Johnny Ng, the Legislative Council approved the bill after its third reading on May 21. The new law is set to come into effect before the end of 2025, marking a pivotal moment in the city’s regulatory landscape.
The bill introduces a licensing regime for stablecoin issuers, overseen by the Hong Kong Monetary Authority (HKMA). It provides a transitional period for businesses to adjust, apply for licenses, and adhere to regulatory requirements. Moving forward, only licensed entities will be permitted to issue fiat-referenced stablecoins linked to the Hong Kong dollar, regardless of their location.
The objective of the new framework is to enhance confidence, transparency, and regulatory compliance within Hong Kong’s burgeoning virtual asset sector. Johnny Ng emphasized the importance of stablecoins backed by fiat currency and encouraged global enterprises and institutions to consider Hong Kong as a prime location for issuing stablecoins.
Furthermore, Ng highlighted that the bill serves as a catalyst for broader Web3 development in the region. The government intends to collaborate closely with private-sector stakeholders to explore use cases and drive adoption of stablecoins.
The Hong Kong government outlined the operational standards that entities issuing fiat-referenced stablecoins must meet under the new framework. These include asset segregation, redemption at par value, and mechanisms to maintain price stability. Compliance with anti-money laundering regulations, risk management protocols, disclosure requirements, and independent auditing are also mandatory for licensed firms. Additionally, only licensed entities are allowed to market these products to the public.
Christopher Hui, Secretary for Financial Services and the Treasury, emphasized that the regulatory model adopted by the law aligns with global standards. This risk-based approach is expected to create a secure user environment, foster sustainable industry growth, and bolster Hong Kong’s reputation as a prominent international financial hub.
In conclusion, Hong Kong’s stablecoin bill signifies a significant milestone in the city’s journey towards becoming a leading player in the digital finance space. By implementing robust regulations and fostering innovation, Hong Kong is poised to attract global players and solidify its position as a hub for virtual assets.