Hong Kong’s financial regulators have announced their intention to introduce a bill on fiat-referenced stablecoins to the Legislative Council later this year. This move comes after the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) conducted a consultation process and published the results.
The stablecoin regime proposed by the regulators will primarily focus on representations of value that are based on decentralized ledgers, where no single entity has unilateral control over the system. The consultation paper, released at the end of last year, received feedback from 108 stakeholders, and the regulators are now considering these suggestions before finalizing the bill for legislative approval.
One of the key aspects of the proposed regulation is the requirement for any entity issuing stablecoins in Hong Kong to obtain a license. The regulators are also exploring the idea of keeping reserve assets with licensed banks in Hong Kong to enhance user protection, although they are open to considering alternative proposals such as storing reserves in other jurisdictions.
Foreign entities seeking to apply for a license will need to establish a subsidiary in Hong Kong and appoint key management personnel, including a CEO, within the territory. The HKMA has indicated a willingness to reduce the frequency of public disclosure, which was initially proposed to be monthly attestation by an independent auditor, and will continue discussions on this matter.
Hong Kong is positioning itself to become a leading crypto hub, in line with other major jurisdictions. For example, Europe’s MiCA stablecoin regime recently came into force, and there are ongoing efforts in the U.S. Congress to advance stablecoin-related legislation. To foster innovation in this space, the HKMA launched a regulatory sandbox in March to provide potential stablecoin issuers with a testing environment, granting them immunity for certain operations.
The HKMA is currently reviewing applications for the stablecoin issuer sandbox and plans to make further announcements in the near future, demonstrating Hong Kong’s commitment to staying at the forefront of the evolving digital asset landscape.