The Hong Kong Legislative Council passes a stablecoin regulation bill, setting a unified standard for industry development.

The Hong Kong Legislative Council officially passed the "Stablecoin Issuers Ordinance Bill" on May 21, 2024, providing the first complete regulatory framework for the stablecoin industry. The bill stipulates that a license is required for engaging in three types of activities related to stablecoins in Hong Kong: issuing fiat stablecoins, issuing Hong Kong dollar stablecoins, and actively promoting the issuance of fiat stablecoins to the Hong Kong public. The ordinance is expected to come into effect within this year.

According to the new regulations, individuals or entities intending to issue or operate "designated stablecoins" in Hong Kong must apply for a license from the Hong Kong Monetary Authority. Applicants will be assessed based on standards such as capital strength, risk management, corporate governance structure, and internal control systems. For example, license holders need a minimum paid-up capital of HKD 25 million.

Licenses do not have a fixed validity period, but if the license holder does not meet the minimum standards or encounters significant issues, the regulatory authority can revoke or suspend their license. Additionally, a "license holder registration list" will be established for public inquiry.

New regulations restrict only designated licensed institutions from selling fiat stablecoins in Hong Kong, and stablecoins aimed at retail investors must be issued by licensed issuers. Engaging in regulated stablecoin activities without a license or unauthorized sales of designated stablecoins will be considered a criminal offense, punishable by a fine of up to 5 million HKD and 7 years in prison.

The bill also requires licensed issuers to maintain a 100% reserve and to segregate reserve assets from their own assets. Stablecoin holders have the right to unconditionally redeem stablecoins at face value, and redemption shall not incur any fees. In addition, licensed issuers must comply with strict anti-money laundering, risk management, information disclosure, and audit requirements.

In addition to legislation, the Hong Kong Monetary Authority has also launched a sandbox program for stablecoin issuers, with three groups of participants selected. Industry insiders say that this regulatory framework will provide strong momentum for the development of the digital asset market and help enhance industry transparency and long-term stability.

Some industry insiders suggest that in the future, it may be worth exploring the use of offshore renminbi and other assets as the underlying assets for stablecoins, and considering directly distributing investment returns to stablecoin holders. At the same time, there are calls to further promote the application of stablecoins in areas such as physical retail and cross-border trade.

With the passage of the bill, some blockchain and virtual asset companies have indicated that they will provide technical support for Hong Kong's stablecoin project, including the development of on-chain infrastructure and the launch of seamless stablecoin swap tools. These initiatives aim to promote the widespread application of stablecoins in real financial scenarios.