The government welcomes the Legislative Council's passage today (May 21) of the (Stablecoin Regulation Bill) to establish a licensing system for fiat stablecoin issuers in Hong Kong, improving the regulatory framework for virtual asset activities in Hong Kong to maintain financial stability while promoting financial innovation.
After the implementation of the (Stablecoin Regulation), anyone issuing fiat stablecoins in Hong Kong during business operations, or issuing fiat stablecoins claiming to be pegged to the Hong Kong dollar value inside or outside Hong Kong, must apply for a license from the Financial Management Commissioner. Relevant individuals must comply with regulations on reserve asset management and redemption, including properly segregating client assets, maintaining a sound stabilization mechanism, and handling redemption requests from stablecoin holders at face value under reasonable conditions. Relevant individuals must also meet a series of requirements for combating money laundering and terrorist financing, risk management, disclosure regulations, auditing, and suitability. The Financial Management Commissioner will consult further on the detailed regulatory requirements of the system in due course.
The licensing system will provide better protection for the public and investors. Among them, the regulations only allow designated licensed institutions to sell fiat stablecoins in Hong Kong, and only fiat stablecoins issued by licensed issuers can be sold to retail investors. Additionally, to prevent fraud, only advertisements related to the issuance of licensed fiat stablecoins will be allowed at any time (including a six-month non-violation period). Citizens should pay attention to the above matters and remain cautious when receiving advertisements or information related to fiat stablecoins.
The Secretary for Financial Services and the Treasury, Xu Zhengyu, stated: 'The regulations adhere to the principle of 'same activities, same risks, same regulations,' focusing on a risk-based approach, and aim 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, promotes sustainable development in the industry, protects user rights, and consolidates Hong Kong's status as an international financial center.'
The President of the Monetary Authority, Yu Wai-man, stated: 'The regulations establish a risk-based, pragmatic, and flexible regulatory system. We believe that a robust and appropriate regulatory environment can create favorable conditions to support the healthy, responsible, and sustainable development of Hong Kong's stablecoins and digital asset ecosystem.'
The regulations are expected to come into effect this year, giving the industry enough time to understand the requirements under the licensing system. The licensing system also includes transitional arrangements to allow the industry to apply for licenses and make appropriate business arrangements in accordance with the regulations.
The government will continue to support the development of the virtual asset industry. With the implementation of regulatory systems for virtual asset trading platforms and stablecoin issuers, the government will soon consult on over-the-counter trading and custodial services for virtual assets and will publish a second declaration on the development of virtual asset policies.
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