Hong Kong Moves Closer to Formalizing Stablecoin Regulations
Hong Kong has taken a significant step towards formalizing its stablecoin regulations by publishing a bill in its gazette on Dec. 6. This bill establishes a clear framework for issuers and marketers in the stablecoin space.
Benefits of Stablecoins
- Useful for cross-border transactions
- Referred to as the crypto industry’s “killer app” by Standard Chartered
New Regulations
Under the new bill, stablecoin issuers and marketers must obtain licenses from the Hong Kong Monetary Authority (HKMA). This requirement applies to stablecoins pegged to the Hong Kong dollar. Issuers are required to maintain reserve assets in local banks, with occasional permission for foreign custody arrangements by the HKMA.
The legislation also includes strict compliance measures, such as a minimum paid-up capital of HK$25 million (over $3 million). Issuers must demonstrate financial health, liquidity, and risk management capabilities. Misrepresentation to promote stablecoins is prohibited to safeguard consumer protection and market integrity.
Enhanced Oversight
Furthermore, the HKMA will have increased powers to oversee, investigate, and enforce compliance within this framework.
Commitment to Innovation
This initiative demonstrates Hong Kong’s dedication to addressing financial risks while fostering innovation. The framework aligns with international standards and emphasizes consistent regulation for similar activities and risks.
Christopher Hui, Secretary for Financial Services and the Treasury, highlighted the importance of aligning with global standards to maintain Hong Kong’s position as a leading financial hub. Eddie Yue, Chief Executive of the HKMA, emphasized the bill’s incorporation of industry feedback and its aim to promote sustainable growth in the stablecoin ecosystem.
Legislative Process
The bill is scheduled for a first reading in the Legislative Council on Dec. 18. If approved, Hong Kong will join other early adopters like the European Union and Japan in regulating stablecoins, surpassing jurisdictions like the US that have yet to implement similar frameworks.
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