Hong Kong has taken steps towards formalizing its regulations surrounding stablecoins by introducing a bill in its gazette on Dec. 6. This bill establishes a clear framework for stablecoin issuers and marketers, requiring them to obtain licenses from the Hong Kong Monetary Authority (HKMA). The legislation also includes strict compliance measures, such as a minimum paid-up capital requirement of HK$25 million and the need to demonstrate financial health, liquidity, and risk management capabilities. Misrepresentation to promote stablecoins is strictly prohibited in order to protect consumers and ensure market integrity.
The HKMA will have enhanced powers to oversee, investigate, and enforce compliance under this new framework. This initiative reflects Hong Kong’s commitment to addressing financial risks while promoting innovation in the stablecoin industry. Officials have emphasized that the regulations align with international standards and follow the principle of applying consistent regulation to similar activities and risks. Christopher Hui, Secretary for Financial Services and the Treasury, has stated that the proposal adheres to the “same activity, same risks, same regulation” principle, reinforcing Hong Kong’s status as a leading financial hub.
Eddie Yue, Chief Executive of the HKMA, has highlighted that the bill incorporates feedback from industry consultations and aims to support sustainable growth within the stablecoin ecosystem. The bill is scheduled for a first reading in the Legislative Council on Dec. 18. If passed, Hong Kong will join other early movers like the European Union and Japan in regulating stablecoins, surpassing jurisdictions like the US that have yet to implement similar frameworks.
Stablecoins have become increasingly popular for cross-border transactions, with Standard Chartered recently referring to them as the “killer app” of the crypto industry. The new regulations in Hong Kong are designed to ensure the stability and reliability of stablecoins pegged to the Hong Kong dollar. Issuers will be required to keep reserve assets in local banks, with occasional allowance for foreign custody arrangements as approved by the HKMA. These regulations are crucial in maintaining the integrity of the stablecoin market and protecting both consumers and investors.
Overall, the introduction of this bill in Hong Kong signals a significant step towards formalizing regulations surrounding stablecoins in the region. By aligning with international standards and implementing strict compliance measures, Hong Kong aims to foster innovation while minimizing financial risks. If the bill is passed, Hong Kong will be at the forefront of stablecoin regulation, joining other leading jurisdictions in establishing a clear framework for issuers and marketers.
