The Hong Kong government approved stablecoin legislation today. The new law provides for fiat-referenced stablecoins (FRC) for issuers in Hong Kong. The goal is to further enhance Hong Kong’s “virtual asset activities.” The new rules will come into effect this year.
The Stablecoins Ordinance requires issuers to be licensed by the Monetary Authority. To be qualified, issuers must satisfy reserve requirements, redemption rights, segregation of assets, and more.
Christopher Hui, the Secretary for Financial Services and the Treasury, said the new Ordinance adheres to the ‘same activity, same risks, same regulation’ principle. It focuses on a risk-based approach to promote a robust regulatory environment. Huis said the rules will promote the industry’s sustainable development while supporting Hong Kong as an international financial center.
Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), added that a robust and fit-for-purpose regulatory environment would provide favourable conditions to support the healthy, responsible, and sustainable development of stablecoins and the broader digital asset ecosystem.
This is not only in line with international regulatory requirements, but also lays a solid foundation for Hong Kong’s virtual asset market, which, in turn, promotes the sustainable development of the industry, protects users’ rights and interests, and strengthens Hong Kong’s status as an international financial centre.”
ZA Bank, a digital bank established in Hong Kong, welcomed the news that a comprehensive regulatory framework for stablecoins was approved.
“We believe this new legislation brings greater clarity and confidence to the stablecoin market, contributing positively to the long-term development of the industry.”
ZA Bank is already working with stablecoin issuers accepted into the HKMA’s stablecoin sandbox.
The development of the stablecoin market is expected to reinforce the bank’s leadership in digital assets and Web3 financial services.
The new stablecoin rules arrive just as the US is on the cusp of approving its own rules to create a regulatory framework for digital currency.
Proponents foresee an ecosystem in which stablecoins can enable quicker, less costly, and more secure value transfer while incorporating enhanced characteristics due to the currency’s digital nature.
