The Legislative Council of Hong Kong approved today a bill that requires stablecoin issuers to obtain a license from the local Monetary Authority (HKMA). This decision came after the third reading by lawmakers.
According to a report issued by the Bill Committee, the initiative seeks to mitigate financial risks through clear provisions on who must obtain a license, what constitutes a regulated stablecoin, the criteria for granting licenses, penalties for non-compliance, and the investigative and enforcement powers granted to the central bank.
Among other aspects, the Hong Kong Monetary Authority (HKMA) will adopt a comprehensive approach to assess whether a specified stablecoin is issued in Hong Kong during the development of business activities, taking into account aspects such as where the issuer's daily activities are managed and operated, its legal domicile, the issuance processes of the stablecoin, the management of reserve assets, and the location of the bank accounts used to handle cash flows.
Stablecoin issuers aiming to maintain a stable value linked to the local currency, the Hong Kong dollar (HKD), whether within or outside the territory, will have to comply with anti-money laundering and counter-terrorism financing requirements. They will also have to adhere to transparency obligations, auditing, and demonstrate suitability and good conduct.
According to the Hong Kong government, the law will come into effect this year, ensuring to "give the industry enough time to understand the requirements of the licensing regime." The Monetary Authority indicated that it will conduct future consultations to further define its regulatory framework.
Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, stated that "a pragmatic, flexible, and risk-based regulatory regime has been created." He noted that a solid regulatory environment will provide favorable conditions to promote the healthy, responsible, and sustainable development of stablecoins and the digital asset ecosystem.
For his part, Christopher Hui, Secretary for Financial Services and the Treasury, stated that "the law not only meets international regulatory standards but also establishes a solid foundation for the virtual asset market in Hong Kong." According to Hui, this "promotes the sustainable development of the industry, protects the rights and interests of users, and strengthens the territory's position as an international financial center."
This initiative in Hong Kong is not an isolated case nor the first time the territory has taken the lead in cryptocurrency regulation compared to other major economies like the United States. In fact, last year, it approved the launch of spot ether (ETH) ETFs before the North American powerhouse did.
Unlike mainland China, Hong Kong maintains a legal framework that allows and encourages the development of crypto assets, functioning as a laboratory for the implementation of new financial policies.
Just as with the approval of spot ether ETFs, the cryptocurrency of Ethereum, this new law in Hong Kong could influence the United States, prompting the country to accelerate the approval of the GENIUS Act, its own legislative project to regulate stablecoins. This would reflect the need to remain competitive in a global market where other regions are already consolidating their leadership in financial innovation.