Hong Kong Stablecoin Licensing System Officially Launched: Complete Regulatory Framework Explained
On 21 May 2024, the Legislative Council of Hong Kong completed the third reading of the Stablecoin Issuers Bill and officially passed it, marking Hong Kong as the first major financial centre in the world to establish a complete regulatory framework for stablecoins. The bill is expected to come into effect within this year, providing legal protection for the healthy development of the stablecoin market.
Legislative Focus
According to the regulations, the following three types of stablecoin-related activities will be included in the scope of license management:
Issuance of fiat stablecoins within Hong Kong
Issue Hong Kong Dollar stablecoin in any region.
Proactively promote its fiat stablecoin to the public in Hong Kong.
Any person or entity wishing to conduct the above-mentioned stablecoin business in Hong Kong must apply for a license from the Monetary Authority of Hong Kong. The regulator will conduct a comprehensive assessment based on factors such as the applicant's capital strength, risk management capabilities, corporate governance structure and internal control system. In terms of capital requirements, licensed institutions are required to hold a minimum share capital of at least HK$25 million.
It is important to note that the license, once issued, will be for an indefinite period unless it is revoked or the licensee terminates operations. The Hong Kong Monetary Authority (HKMA) has the power to revoke or suspend the licensee's licence if it fails to meet the minimum standards or has serious problems, such as failure to meet payment obligations, improper governance or illegal acts, and appoint a statutory administrator to take over the business if necessary to protect the public interest. To enhance transparency, the regulator will also establish a public "Licensee Registration List" to facilitate public searches for legitimate business entities.
Trading Restrictions and Sales Channels
According to the Secretary for Financial Services and the Treasury of Hong Kong, Christopher Hui, the Ordinance clearly stipulates that only designated licensed institutions can sell fiat-currency stablecoins in Hong Kong, and stablecoins for retail investors must be issued by licensed issuers. These institutions approved to sell stablecoins include:
Stablecoin issuer licensed by the financial management commissioner
Banking institutions
Institutions holding the CSRC No. 1 license ( for securities trading ).
Hong Kong licensed virtual asset trading platform
Violation Penalties
The ordinance imposes severe penalties on unlicensed or unauthorized sales of stablecoins. Violators are liable to a maximum fine of HK$5 million and imprisonment for 7 years. Summary conviction is punishable by a fine of HK$500,000 and imprisonment for two years, with an additional fine of up to HK$100,000 per day for a continuing offence.
Core Regulatory Requirements
The regulations impose four key requirements on stablecoin issuers:
100% Reserve and Asset Segregation: Licensed issuers must ensure that reserve assets consist of high-quality, highly liquid assets, and that their value is always equivalent to the market circulation of the stablecoin denomination. These reserve assets must be strictly managed separately from the issuer's own assets to ensure fund security.
Unconditional Redemption Mechanism: Stablecoin holders have the right to redeem stablecoins at face value without any fees, and the issuer must process redemption requests within a reasonable time.
Comprehensive Compliance System: Licensed institutions must establish a sound anti-money laundering, risk management, and information disclosure system, and select qualified auditing firms for auditing to ensure operational transparency.
Trading Venue Restrictions: Stablecoins must be traded on licensed virtual asset trading platforms.
Industry Response
As of February this year, the Hong Kong Monetary Authority (HKMA) has launched a sandbox scheme for stablecoin issuers, and as of February this year, three groups of participants have been selected to enter the testing phase: a team from Standard Chartered Hong Kong and HKT, JD Chain Technology ( Hong Kong ) and Yuanbi Innovation Technology.
Jingdong Group Vice President Shen Jiangguang stated in April that the Jingdong stablecoin has entered the "sandbox" testing phase in Hong Kong and is expected to be applied globally in the future. The project aims to enhance the efficiency of global supply chains and cross-border payments while strictly adhering to regulatory requirements in various countries.
Hong Kong Legislative Council member Wu Kit-chuang commented positively, believing that the law is an important starting point for building Web3 infrastructure, and suggested that the application of stablecoins in physical retail and cross-border trade can be further promoted in the future, and the scope of the underlying assets of stablecoins should be expanded to offshore RMB and other assets, and at the same time explore the release of stablecoin interest to enhance market attractiveness.
After the bill was passed, multiple market participants responded swiftly. A blockchain infrastructure provider announced that it would provide a full suite of on-chain support for Hong Kong's stablecoin and its reserve asset project, and plans to launch a no-loss, 1:1 on-chain stablecoin swap tool to promote the application of stablecoins in real financial scenarios.
A licensed virtual asset trading platform also expressed high concern and support, believing that at this critical moment of transformation in the global traditional financial system, this regulatory framework will inject strong momentum into the development of the digital asset market, enhancing industry transparency and long-term stability.
The formal implementation of this regulation will provide a clear legal framework for fintech innovation in Hong Kong, and is expected to promote Hong Kong's development as a global leading virtual asset center. Industry insiders generally believe that reasonable regulation can not only protect investors' rights and interests but also drive the healthy development and innovation of the stablecoin ecosystem.
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Hong Kong Passes Stablecoin Regulatory Bill: The World's First Complete Framework and Licensing Requirements
Hong Kong Stablecoin Licensing System Officially Launched: Complete Regulatory Framework Explained
On 21 May 2024, the Legislative Council of Hong Kong completed the third reading of the Stablecoin Issuers Bill and officially passed it, marking Hong Kong as the first major financial centre in the world to establish a complete regulatory framework for stablecoins. The bill is expected to come into effect within this year, providing legal protection for the healthy development of the stablecoin market.
Legislative Focus
According to the regulations, the following three types of stablecoin-related activities will be included in the scope of license management:
Any person or entity wishing to conduct the above-mentioned stablecoin business in Hong Kong must apply for a license from the Monetary Authority of Hong Kong. The regulator will conduct a comprehensive assessment based on factors such as the applicant's capital strength, risk management capabilities, corporate governance structure and internal control system. In terms of capital requirements, licensed institutions are required to hold a minimum share capital of at least HK$25 million.
It is important to note that the license, once issued, will be for an indefinite period unless it is revoked or the licensee terminates operations. The Hong Kong Monetary Authority (HKMA) has the power to revoke or suspend the licensee's licence if it fails to meet the minimum standards or has serious problems, such as failure to meet payment obligations, improper governance or illegal acts, and appoint a statutory administrator to take over the business if necessary to protect the public interest. To enhance transparency, the regulator will also establish a public "Licensee Registration List" to facilitate public searches for legitimate business entities.
Trading Restrictions and Sales Channels
According to the Secretary for Financial Services and the Treasury of Hong Kong, Christopher Hui, the Ordinance clearly stipulates that only designated licensed institutions can sell fiat-currency stablecoins in Hong Kong, and stablecoins for retail investors must be issued by licensed issuers. These institutions approved to sell stablecoins include:
Violation Penalties
The ordinance imposes severe penalties on unlicensed or unauthorized sales of stablecoins. Violators are liable to a maximum fine of HK$5 million and imprisonment for 7 years. Summary conviction is punishable by a fine of HK$500,000 and imprisonment for two years, with an additional fine of up to HK$100,000 per day for a continuing offence.
Core Regulatory Requirements
The regulations impose four key requirements on stablecoin issuers:
100% Reserve and Asset Segregation: Licensed issuers must ensure that reserve assets consist of high-quality, highly liquid assets, and that their value is always equivalent to the market circulation of the stablecoin denomination. These reserve assets must be strictly managed separately from the issuer's own assets to ensure fund security.
Unconditional Redemption Mechanism: Stablecoin holders have the right to redeem stablecoins at face value without any fees, and the issuer must process redemption requests within a reasonable time.
Comprehensive Compliance System: Licensed institutions must establish a sound anti-money laundering, risk management, and information disclosure system, and select qualified auditing firms for auditing to ensure operational transparency.
Trading Venue Restrictions: Stablecoins must be traded on licensed virtual asset trading platforms.
Industry Response
As of February this year, the Hong Kong Monetary Authority (HKMA) has launched a sandbox scheme for stablecoin issuers, and as of February this year, three groups of participants have been selected to enter the testing phase: a team from Standard Chartered Hong Kong and HKT, JD Chain Technology ( Hong Kong ) and Yuanbi Innovation Technology.
Jingdong Group Vice President Shen Jiangguang stated in April that the Jingdong stablecoin has entered the "sandbox" testing phase in Hong Kong and is expected to be applied globally in the future. The project aims to enhance the efficiency of global supply chains and cross-border payments while strictly adhering to regulatory requirements in various countries.
Hong Kong Legislative Council member Wu Kit-chuang commented positively, believing that the law is an important starting point for building Web3 infrastructure, and suggested that the application of stablecoins in physical retail and cross-border trade can be further promoted in the future, and the scope of the underlying assets of stablecoins should be expanded to offshore RMB and other assets, and at the same time explore the release of stablecoin interest to enhance market attractiveness.
After the bill was passed, multiple market participants responded swiftly. A blockchain infrastructure provider announced that it would provide a full suite of on-chain support for Hong Kong's stablecoin and its reserve asset project, and plans to launch a no-loss, 1:1 on-chain stablecoin swap tool to promote the application of stablecoins in real financial scenarios.
A licensed virtual asset trading platform also expressed high concern and support, believing that at this critical moment of transformation in the global traditional financial system, this regulatory framework will inject strong momentum into the development of the digital asset market, enhancing industry transparency and long-term stability.
The formal implementation of this regulation will provide a clear legal framework for fintech innovation in Hong Kong, and is expected to promote Hong Kong's development as a global leading virtual asset center. Industry insiders generally believe that reasonable regulation can not only protect investors' rights and interests but also drive the healthy development and innovation of the stablecoin ecosystem.