Briefly
- The ordinance mandates licenses for fiat-referenced stablecoin (FRS) issuers underneath the HKMA
- Issuers should meet reserve, redemption, AML, and danger administration requirements
- It comes because the U.S. Senate advances its personal stablecoin framework
Hong Kong handed laws on Wednesday making a licensing regime for fiat-referenced stablecoins, advancing its purpose of turning into a digital asset hub whereas responding to considerations over investor safety and monetary stability.
The brand new regulation, handed by town’s Legislative Council, requires FRS issuers to acquire a license from the Hong Kong Financial Authority (HKMA).
Licensees should adjust to a variety of necessities protecting reserve asset administration, redemption at par worth, segregation of shopper funds, anti-money laundering controls, disclosure, and health and propriety requirements.
“The Ordinance adheres to the ‘identical exercise, identical dangers, identical regulation’ precept, with a deal with a risk-based strategy to advertise a sturdy regulatory atmosphere,” Christopher Hui, Secretary for Monetary Companies and the Treasury, mentioned in a assertion.
“This isn’t solely according to worldwide regulatory necessities, but additionally lays a stable basis for Hong Kong’s digital asset market,” he added.
Embracing crypto
The regulation is a part of Hong Kong’s efforts to rehabilitate its crypto status and encourage the expansion of the trade after the collapse of fraudulent trade JPEX in 2023.
Occurring simply as Hong Kong pivoted to embracing crypto after years of hesitation, authorities are actually making an attempt to strike a troublesome steadiness between encouraging innovation in digital property whereas making certain retail traders are shielded from abuse.
Below the brand new regime, solely licensed establishments can concern an FRS in Hong Kong, and solely licensed choices could also be marketed to retail traders.
Unauthorized ads will likely be banned, even through the six-month grace interval earlier than enforcement begins. The HKMA will seek the advice of additional on detailed necessities.
The marketplace for stablecoins in Hong Kong stays modest in comparison with world volumes.
“The brand new invoice offers issuers one thing tangible: readability on licensing, redemption obligations, reserve necessities, and a framework that’s pleasant to conventional finance,” Justin d’Anethan, head of gross sales at token advisory agency Liquifi, informed Decrypt. “However let’s be candid, Hong Kong stays a smaller node in world stablecoin exercise.”
Tether continues to be the popular cryptocurrency within the quite a few OTC buying and selling outlets in Hong Kong. On the identical time, U.S. dollar-backed property in American markets stay the main power within the stablecoin sector worldwide.
Hong Kong’s laws comes because the U.S. Senate advances its personal stablecoin invoice. The GENIUS Act, which just lately cleared a key procedural vote, would create a nationwide authorized framework for issuing stablecoins within the U.S. The act should nonetheless move the Home earlier than reaching President Trump, who is predicted to signal it into regulation.
“For some time, Hong Kong, Singapore, and to some extent Dubai, held the crown when it got here to forward-leaning crypto coverage. However the final six months flipped the script,” d’Anethan mentioned. “The U.S., lengthy seen as adversarial, turned the surprising epicenter of pro-crypto regulatory momentum.”
Hong Kong’s stablecoin ordinance is predicted to come back into impact later this 12 months, with transitional provisions to assist issuers regulate to the brand new regime.
Edited by Sebastian Sinclair
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