Hong Kong passes stablecoin bill, licensing mandatory for token issuers

The Hong Kong government passed the stablecoin bill, which marks the beginning of licensing for stablecoin issuers

The legislative council on Wednesday passed the bill on its third reading, which directs the token issuers to get licensing from the Hong Kong Monetary Authority (HKMA).

Stablecoin is a digital asset that is pegged to conventional currencies like the dollar or to commodities such as gold

What the bill entails

An issuer of a stablecoin that pegs its value to Hong Kong dollars inside or outside Hong Kong will need to obtain a license from the HKMA

The relevant persons issuing the stablecoins need to satisfy requirements in “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”, the government said in its release

The issuers also need to make sure they comply with standards for anti-money laundering, counter terrorist financing, risk management, disclosure and auditing, fitness, and property

The government said the ordinance is expected to come into effect this year

This is to provide sufficient time for the industry to understand the requirements needed under the licensing regime

HKMA added that there will be additional consultations on the detailed regulatory framework

The Chief Executive of the Hong Kong Monetary Authority, Mr Eddie Yue, said, “The Ordinance has established a risk-based, pragmatic, and flexible regulatory regime. We believe that a robust and fit-for-purpose regulatory environment would provide favourable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the broader digital asset ecosystem.”

The latest addition to Hong Kong’s crypto regulations

Hong Kong had enacted a crypto licensing regime in 2023 to protect retail investors.

Hong Kong was the first Asian country to accept crypto products as a mainstream investment asset

It had also started Asia’s first spot crypto exchange-traded funds in 2024.

The country had also launched a sandbox in 2024 to allow stablecoin trials in a limited and risk-controlled environment

US’s GENIUS Act

The US Government is also planning a bill that is designed to regulate stablecoins. The bill is dubbed the GENIUS Act.

The US Senate advanced the bill earlier this week on a bipartisan vote. The bill was advanced with a 66-32 vote on Monday

The bill would require stablecoins to be backed fully by US dollars or highly liquid assets.

It also mandates annual audits with issuers with a market capitalization of more than $50 billion

The bill was voted on by the Senate after a couple of amendments were forced by the Democrats

This includes changes to consumer protection safeguards and limits on tech companies issuing stablecoins.

It also includes ethical standards for special government employee,s which would apply to Elon Musk and David Sacks

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