Hong Kong’s legislature passed the Stablecoins Ordinance to regulate issuance and operation of fiat-referenced stablecoins. The law mandates that any entity issuing stablecoins pegged to the Hong Kong dollar or other official currencies must secure a license from the Hong Kong Monetary Authority (HKMA). The licensing regime includes stringent reserve management standards, redemption procedures, and ongoing risk management requirements to safeguard token holders.
Under the new framework, licensed stablecoin issuers must maintain reserve assets in segregated accounts, with regular independent audits to verify full backing of circulating tokens. Redemption obligations require issuers to convert tokens back to fiat currency on demand at par value, ensuring stability and public confidence. Risk controls include mandatory disclosure of operational policies, incident reporting protocols, and capital adequacy thresholds to absorb potential losses.
The ordinance aligns with international regulatory recommendations, adopting “same activity, same risks, same regulation” principle. It extends to issuance activities conducted outside Hong Kong if tokens purport to maintain parity with the Hong Kong dollar. Sandbox initiatives introduced by the HKMA last year provided test environments for proof-of-concept stablecoin projects under regulatory supervision. Three participants completed initial sandbox trials, generating data to inform final rule-making.
Government statements emphasized investor protection and market integrity. Christopher Hui, Secretary for Financial Services and the Treasury, noted that the law will strengthen Hong Kong’s competitiveness as global digital asset hub by providing clear regulatory standards. Industry feedback sessions highlighted compliance cost concerns for smaller issuers but generally supported enhanced legal certainty.
Ordinance provisions include anti-money laundering and counter-terrorist financing requirements consistent with existing virtual asset regulations. Issuers must implement robust know-your-customer (KYC) and transaction monitoring systems. Penalties for non-compliance include fines and imprisonment for unlicensed issuance or advertising of stablecoins. Enforcement mechanisms empower HKMA to suspend trading and revoke licenses for breaches.
Implementation timeline targets commencement within current calendar year, with HKMA issuing detailed guidance on application processes and technical standards. Industry stakeholders anticipate phased rollout of regulatory obligations, allowing time for system upgrades and policy alignment. Observers view stablecoin ordinance as foundational step toward broader virtual asset ecosystem development, setting precedent for digital asset regulation in Asia.
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