The bill establishes a mandatory licensing system for stablecoin issuers, aiming to balance innovation incentives and financial stability and enhance Hong Kong’s international competitiveness in the crypto asset sector.
Core regulatory framework: License access and continuous compliance
According to the bill, all entities that issue or sell stablecoins in Hong Kong are required to apply to the Hong Kong Monetary Authority (HKMA) for a “Stablecoin Issuer License”. The Hong Kong Monetary Authority will conduct a strict review of the applicant’s capital strength (minimum paid-in capital of HK $50 million), asset reserves (100% coverage of circulating stablecoins), risk management mechanisms, etc. Licensed institutions are required to regularly disclose audit reports and comply with relevant regulations on anti-money laundering (AML) and combating terrorist financing (CFT).
The bill particularly emphasizes the “regulatory sandbox” mechanism, allowing innovative enterprises to test new stablecoin models in a controllable environment, such as algorithmic stablecoins based on Hong Kong dollars or cross-chain stablecoin projects. The Chief Executive of the Hong Kong Monetary Authority, Norman Chan, said, “Our goal is to create a regulatory environment that is’ risk-controllable and innovation-orderly ‘, making compliant stablecoins a bridge connecting traditional finance and Web3.”
Policy background: Intensified competition among global stablecoins
This legislation comes at a time when major economies around the world are accelerating the layout of stablecoin regulation. The US Department of the Treasury recently released the “National Strategy for Cryptocurrencies”, requiring stablecoin issuers to meet federal-level capital requirements. The EU’s “Crypto Asset Markets Regulation” (MiCA) imposes strict restrictions on algorithmic stablecoins. As an international financial center, Hong Kong hopes to attract high-quality projects to settle down through a clear licensing system. Especially with the advantage of being backed by the RMB market, it is expected to promote the coordinated development of the “Digital Hong Kong Dollar” and compliant stablecoins.
The Secretary for Financial Services and the Treasury of Hong Kong, Mr. Paul Chan Mo-po, pointed out: “Stablecoins are the infrastructure of decentralized finance (DeFi) and an important carrier for cross-border payments. The passage of the bill will enhance market confidence in Hong Kong’s regulatory framework and help consolidate its position as a fintech hub under the principle of ‘one country, two systems’.”
Industry impact: Accelerated compliance and market differentiation
After the bill comes into effect, the existing stablecoin projects operating in Hong Kong must complete compliance rectifications within 12 months. According to the data from the Hong Kong Monetary Authority, there are currently about seven stablecoin projects in the testing stage, including the Hong Kong-based USDH and cross-border settlement pilot projects. Industry insiders predict that small and medium-sized issuers may exit the market due to higher compliance costs, while projects backed by traditional financial institutions (such as Stable Hong Kong Dollar supported by HSBC) will gain a first-mover advantage.
The head of the Asia-Pacific region of cryptocurrency exchange OKX stated: “The licensing system will enhance the transparency of the stablecoin market and reduce the risk of ‘runaway coins’. For investors, choosing licensed stablecoins means higher asset security, which may reshape the market landscape.” However, there are also voices pointing out that strict asset reserve requirements (such as 100% fiat currency collateral) may limit the innovation space of algorithmic stablecoins, and a balance needs to be struck between regulation and technological breakthroughs.
Future outlook: Connecting the “Digital RMB” with international payments
The bill reserves an interface for Hong Kong’s participation in cross-border collaboration on central bank digital currencies (CBDCS). The Hong Kong Monetary Authority is collaborating with the Digital Currency Research Institute of the People’s Bank of China to explore the interoperability between the “Digital RMB” and the Hong Kong dollar stablecoin. Analysis suggests that if technological integration can be achieved, Hong Kong is expected to become a “digital channel” for the internationalization of the RMB, especially playing a role in trade settlements among countries along the “Belt and Road”.
Xu Zhengyu disclosed that the next step will be to formulate the “Detailed Rules for the Licensing of Virtual Asset Service Providers”, and it is planned to solicit public opinions in the first quarter of 2025 to further improve the full-chain supervision of crypto assets. “We do not pursue regulatory arbitrage. Instead, we aim to enable fintech to truly serve the real economy by establishing systems that are compatible with international standards and in line with Hong Kong’s actual conditions.” ” He emphasized.
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