Hong Kong Proposes New Regulations for Stablecoin Issuers

Hong Kong has enacted a significant bill aimed at regulating stablecoins that are backed by fiat currency, underscoring its ambition to emerge as a key player in the digital finance sector.

On May 21, Johnny Ng, a lawmaker in Hong Kong, announced that the Legislative Council had given its approval for the bill after a thorough deliberation process. The legislation is anticipated to come into effect by the end of 2025.

### Licensing Framework

The newly established framework introduces a licensing system for organizations issuing stablecoins through the Hong Kong Monetary Authority (HKMA). A transitional phase will allow companies time to adjust, apply for necessary licenses, and align with regulatory requirements.

When the regulations are implemented, only those entities that have obtained a license will be permitted to issue fiat-pegged stablecoins related to the Hong Kong dollar, irrespective of their physical location.

This initiative aims to enhance trust, transparency, and compliance adherence within the expanding digital asset environment of the city.

Ng emphasized, “Stablecoins in Hong Kong are underpinned by fiat currencies, and we invite global companies and institutions interested in launching stablecoins to seek licensing in Hong Kong.”

He also highlighted that the bill serves as a foundation for advancing Web3 initiatives in the area, with plans for the government to collaborate closely with private-sector stakeholders to foster practical applications and encourage stablecoin usage.

### Hong Kong’s Stablecoin Legislation

According to the local government, the new regulations mandate that any entity issuing a fiat-referenced stablecoin linked to the Hong Kong dollar must adhere to stringent operational criteria.

These criteria encompass clear asset differentiation, options for redemption at equal value, and a dependable method for ensuring price stability.

Entities must also follow anti-money laundering regulations, implement risk management strategies, fulfill disclosure responsibilities, and undergo independent audits. Furthermore, only licensed companies will have the authority to market or publicize these financial products.

Christopher Hui, the Secretary for Financial Services and the Treasury, indicated that the legislation employs a risk-oriented regulatory approach that is in line with global practices.

He noted that this strategy aims to foster a safer environment for users, stimulate long-term industry growth, and bolster Hong Kong’s standing as a premier global financial center.