Here is a detailed interpretation of the event:
• Background and Purpose: With the development of virtual asset trading, the role of stablecoins in the Web3 and virtual asset ecosystem is becoming increasingly important and may become a widely accepted medium of payment, but it also poses risks to monetary and financial stability. Therefore, it is necessary to establish a regulatory system for fiat stablecoin issuers to mitigate risks, protect users, and promote the sustainable development of the stablecoin industry.
• Main Content: After the implementation of the regulations, anyone issuing fiat stablecoins in Hong Kong during business operations, or issuing fiat stablecoins claiming to be pegged to the value of the Hong Kong dollar in Hong Kong or elsewhere, must apply for a license from the Financial Management Commissioner. Relevant parties must comply with regulations regarding reserve asset management and redemption, including proper segregation of client assets, maintaining a sound stabilization mechanism, and processing redemption requests from stablecoin holders at par under reasonable conditions. In addition, the industry suggests expanding the scope of recognized providers to licensed stored value payment tool providers, which the government agreed to include after consideration and requires them to obtain the Commissioner's approval before selling stablecoins. Stablecoins issued by unlicensed entities are limited to sales to professional investors and must be marked as unlicensed issuance.
• Significance and Impact:
◦ Impact on Hong Kong's Financial Market: The regulations adhere to the principle of 'same activities, same risks, same regulation', focusing on risk-based approaches and aiming to create a robust regulatory environment that not only meets international regulatory requirements but also provides a stable foundation for Hong Kong's virtual asset market, helping to consolidate Hong Kong's position as an international financial center and compete for the status of a global digital financial hub.
◦ Impact on the Stablecoin Industry: By clarifying rules to balance financial innovation and risk control, it helps curb previous issues such as money laundering and fraud due to regulatory gaps, providing clear guidance for compliant issuance and trading of stablecoins in Hong Kong, and promoting the healthy, responsible, and sustainable development of the stablecoin industry.
◦ Global Regulation: Hong Kong is the first to complete stablecoin legislation, taking a key step in global virtual asset regulation by clarifying cross-border regulatory rules for stablecoins through legislation, while reserving space for mutual recognition with international regulations, which may provide a model for other jurisdictions.
