On December 6, Hong Kong took a significant step towards regulating stablecoins by publishing a bill that outlines a comprehensive framework for issuers and marketers. This move comes as stablecoins gain traction as effective tools for cross-border transactions, with Standard Chartered referring to them as the crypto industry’s “killer app.”
The proposed legislation mandates that stablecoin issuers and marketers obtain licenses from the Hong Kong Monetary Authority (HKMA), including those pegged to the Hong Kong dollar. Issuers are required to maintain reserve assets in local banks, although the HKMA may permit foreign custody arrangements under certain conditions.
The bill imposes stringent compliance measures, including a minimum paid-up capital of HK$25 million (over $3 million) and a requirement for issuers to demonstrate robust financial health, liquidity, and risk management.
To protect consumers and ensure market integrity, activities such as misrepresentation in promoting stablecoins are strictly prohibited. The HKMA will also gain enhanced powers for oversight, investigation, and enforcement.
This initiative underscores Hong Kong’s dedication to mitigating financial risks while promoting innovation, aligning with international standards. Christopher Hui, Secretary for Financial Services and the Treasury, emphasized the principle of “same activity, same risks, same regulation.”
The bill is scheduled for its first reading in the Legislative Council on December 18, positioning Hong Kong alongside early adopters like the European Union and Japan in the regulation of stablecoins, while surpassing jurisdictions such as the US, which has yet to establish similar frameworks.
