The Hong Kong government has approved new legislation to regulate fiat-referenced stablecoins (FRC), marking a significant move toward establishing a comprehensive, risk-based regulatory framework for stablecoin issuers within the region. The new Stablecoins Ordinance requires any entity issuing stablecoins linked to the Hong Kong dollar or operating in Hong Kong to obtain a license from the Hong Kong Monetary Authority (HKMA).
To qualify, issuers must meet strict requirements, including maintaining sufficient reserves, providing redemption rights at face value, ensuring segregation of customer assets, and adhering to robust anti-money laundering, risk management, disclosure, and auditing standards. This licensing mandate aligns with the 'same activity, same risks, same regulation' principle, promoting a stable and transparent environment for digital asset activities.
Key figures, including Christopher Hui, Secretary for Financial Services and the Treasury, and Eddie Yue, Chief Executive of HKMA, have highlighted the regulation’s role in fostering the healthy, responsible, and sustainable development of stablecoins and the broader digital asset ecosystem. This framework is also designed to enhance Hong Kong's status as a leading international financial center by protecting users’ rights and interests and ensuring compliance with international regulatory standards.
Digital bank ZA Bank welcomed the legislation, noting that it adds clarity and confidence to the stablecoin market and supports the growth of digital assets and Web3 financial services. The regulation is expected to be implemented within the current year, coinciding with similar global regulatory developments, such as impending cryptocurrency rules in the United States. Additionally, the government plans to extend regulatory oversight to crypto trading platforms, over-the-counter services, and custodians in the near future, amidst a rising interest in cryptocurrencies among Hong Kong residents.