Hong Kong to Introduce Stablecoin Framework

Hong Kong is establishing a bill that outlines a detailed framework for stablecoin issuers and marketers.

Under the proposed framework, stablecoin issuers and marketers must secure licenses from the Hong Kong Monetary Authority (HKMA). The rule applies to all stablecoins, including those pegged to the Hong Kong dollar, while issuers are required to maintain reserve assets in local banks. Foreign custody might also be allowed by HKMA under specific conditions.

New compliance measures will be implemented, such as a minimum paid-up capital requirement of HK$25 million, as well as proof of robust financial health, sufficient liquidity, and risk management frameworks. Misrepresentation or false promotion of stablecoins is explicitly prohibited.

HKMA has also further expanded its authority to oversee, investigate, and enforce compliance.

The Stablecoins Bill will be introduced into the Legislative Council for a first reading on December 18.

“The legislative proposal is essential for Hong Kong in fulfilling our obligations as a member of the Financial Stability Board,” Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, said in a statement.

“This risk-based proposal aims to promote a robust regulatory environment, which is in line with Hong Kong’s approach to virtual-asset development.”

Hong Kong's bill positions it as an early mover alongside the EU and Japan. In July, Circle, the issuer of the USD Coin (USDC) and Euro Coin (EURC) stablecoins became the first global stablecoin issuer to achieve compliance with the European Union's Markets in Crypto-Assets (MiCA) regulatory framework.

In June, the Japanese parliament enacted a law recognizing stablecoins as a form of digital currency. According to the legislation, stablecoins must be tied to the yen and ensure holders can redeem each token at its full face value.

Hong Kong has made significant strides in an attempt to establish itself as a crypto-friendly regional hub. Just last month, Hong Kong proposed waiving crypto tax for wealthy individuals in an attempt to strengthen its position as a leading regional crypto hub.

In a 20-page proposal, the Hong Kong government said the tax exemption would apply to private equity funds, hedge funds, and the investment vehicles of wealthy individuals on cryptocurrency gains, private credit investments, and other asset classes.