Hong Kong Advances Stablecoin Regulation with Comprehensive New Framework

Hong Kong has taken a significant step toward regulating stablecoins, publishing a bill in its gazette on December 6 that establishes clear rules for issuers and marketers. This new framework could position the region ahead of global competitors, including the United States, in digital asset oversight.

Stablecoins have emerged as essential tools for cross-border payments, with financial giant Standard Chartered referring to them as the crypto industry's "killer app." The new legislation mandates that all stablecoin issuers and marketers obtain licenses from the Hong Kong Monetary Authority (HKMA). This requirement applies to all stablecoins, including those pegged to the Hong Kong dollar. Issuers must maintain reserve assets in local banks, although exceptions for foreign custody may be permitted under certain circumstances.

Key compliance measures include a minimum paid-up capital of HK$25 million (over $3 million), alongside stringent financial health, liquidity, and risk management standards. The bill also prohibits misleading promotion practices, reinforcing consumer protection and market integrity.

The HKMA will be granted enhanced powers to supervise, investigate, and enforce compliance, ensuring the stability and reliability of the ecosystem. The framework has been designed to address financial risks while fostering innovation, adhering to international standards and the principle of applying consistent regulations to similar activities and risks.

Christopher Hui, Secretary for Financial Services and the Treasury, emphasized the alignment with global standards, stating that the "same activity, same risks, same regulation" approach underpins the framework. Eddie Yue, Chief Executive of the HKMA, added that the bill reflects industry feedback and aims to promote sustainable growth within the stablecoin sector.

Scheduled for its first reading in the Legislative Council on December 18, the bill positions Hong Kong as a leader in stablecoin regulation. By acting decisively, Hong Kong joins jurisdictions like the European Union and Japan in advancing comprehensive oversight of digital assets, outpacing regions like the United States, which have yet to implement similar frameworks.