Hong Kong Enacts Stablecoin Law, Challenges USD, and Promotes Blockchain

Hong Kong has announced a stablecoin law effective from 01/08, requiring fiat-pegged stablecoin issuers to be licensed by the Hong Kong Monetary Authority (HKMA), comply with reserve management, peg value equivalence, segregate funds, and control AML. Financial Secretary Paul Chan emphasized support for de-dollarization, promoting domestic currency transactions in Asia and the Southern Hemisphere, reducing payment costs, and enhancing cross-border trade efficiency. However, the capital requirement being three times that of Singapore may hinder giants like Circle and Tether, favoring domestic companies. This law, backed by Beijing, reinforces Hong Kong's position as an offshore RMB center, promoting global DeFi and blockchain.

Sean Lee (IDA) assesses the law as progressive but limiting for international issuers due to reserve requirements and operations in Hong Kong. Although the current stablecoin costs are not competitive with Wise, Lee is optimistic about the potential for cost reduction in the future due to improved liquidity. Jack Zhang (Airwallex) believes that the conversion fees for stablecoins to local currency are still higher than the interbank foreign exchange market. Nevertheless, this law opens opportunities for multi-currency stablecoins, enhancing Hong Kong's role in digital finance, especially as China accelerates the internationalization of the yuan.

Risk Warning: The information is for reference only and is not investment advice.

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