The Government welcomed the passage of the Stablecoins Bill by the Legislative Council today, with a view to establishing a licensing regime for fiat-referenced stablecoins (FRS) issuers in Hong Kong.
Upon implementation of the Stablecoins Ordinance, any person who, in the course of business, issues an FRS in Hong Kong, or issues an FRS that purports to maintain a stable value with reference to Hong Kong dollar in or outside Hong Kong, will need to obtain a licence from the Monetary Authority.
The relevant parties must satisfy the requirements in areas such as reserve asset management and redemption, including proper segregation of client assets, maintaining a robust stabilisation mechanism, and processing stablecoin holders’ requests for redemption at par value with reasonable conditions.
Such individuals must also comply with requirements in relation to anti-money laundering and counter-terrorist financing, risk management, disclosure and auditing, and fitness and propriety.
The Government explained that the regulatory regime will provide better protection for the general public and investors.
In particular, only specified licensed institutions may offer an FRS in Hong Kong, and only an FRS issued by a licensed issuer may be offered to a retail investor. Additionally, to prevent fraud and scams, only advertisements of licensed FRS issuance are allowed.
Secretary for Financial Services & the Treasury Christopher Hui said: “The ordinance adheres to the ‘same activity, same risks, same regulation’ principle, with a focus on a risk-based approach to promote a robust regulatory environment.
“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.”
The ordinance is expected to come into effect this year. A transitional arrangement will be implemented to facilitate the industry in applying for a licence and making suitable business arrangements in accordance with the regulatory regime.
Separately, the Monetary Authority will conduct further consultations on the detailed regulatory requirements of the regime in due course.
