The Hong Kong 'Stablecoin Regulation' will come into effect on August 1. The Secretary for Financial Services and the Treasury, Christopher Hui, stated on July 7 that the Monetary Authority is currently consulting the market on the implementation of regulatory guidelines, which will be announced in July. The goal is to issue stablecoin licenses within this year, with the number of licenses granted expected to be in single digits. This initiative has multiple important implications:
• Establishing a Robust Regulatory Environment: The 'Stablecoin Regulation' adheres to the principle of 'same activity, same risk, same regulation', focusing on risk management. The implementation of this regulation fills the regulatory gap for fiat-backed stablecoins, providing a stable foundation for Hong Kong's virtual asset market, promoting sustainable industry development, protecting user rights, and consolidating Hong Kong's position as an international financial center.
• Supporting the Internationalization of the Renminbi: With the regulation in place, compliant stablecoins pegged to the Hong Kong dollar or Renminbi are expected to gain wider usage. Hong Kong can leverage its status as an international financial hub to promote Renminbi stablecoins as a reliable alternative to US dollar stablecoins, further expanding the influence of Renminbi in the global digital currency system.
• Expanding Corporate Financing Channels: Stablecoins can open new pathways for corporate financing, particularly providing more efficient capital solutions for cross-border trade, small and medium-sized enterprises, and emerging market companies. For example, companies can issue bonds linked to stablecoins, saving on exchange losses and fees incurred from traditional currency conversion and cross-border settlements.
• Promoting the Development of the Digital Asset Industry: Hong Kong is the world's first international financial center to establish a dedicated regulatory framework for fiat-backed stablecoins. The implementation of the 'Stablecoin Regulation' holds strategic significance in attracting global fintech companies to set up in Hong Kong and promoting the integration of virtual assets with traditional finance.
• Enhancing Payment Efficiency: Stablecoins are viewed as an alternative to traditional financial systems, with the potential to reshape payment and capital market activities. For example, in cross-border payments, stablecoins can achieve settlement in seconds, with cost reductions of up to 90%, significantly better than traditional wire transfers.