Hong Kong’s initiative to regulate stablecoins has gained momentum with the introduction of a proposed Stablecoins Bill, now entering the Legislative Council for consideration. Published in the regional Gazette on December 6, the bill was subsequently presented for its first reading on December 18. This step marks a significant move towards establishing a structured regulatory framework for stablecoins in the region.
Before the bill can become law, it must undergo a rigorous process involving three readings, during which it will be debated, scrutinized, and potentially amended. Upon successful completion of the third reading, the bill will be sent to the region’s chief executive for final approval.
The proposed legislation outlines several essential elements. One of the primary features is the requirement for stablecoin issuers to obtain a license from the Hong Kong Monetary Authority (HKMA), the region’s central banking authority. The licensing process necessitates compliance with specific criteria, ensuring that issuers meet established standards regarding their operations.
The regulatory body will thoroughly assess each issuer alongside its controllers, available resources, and the assets backing the stablecoins, as well as the mechanisms in place to stabilize their value. Notably, only licensed entities will be permitted to offer and promote stablecoins in Hong Kong, thereby enhancing the safety and legitimacy of such financial products.
Additionally, the bill aims to bolster consumer protection, benefitting various stakeholders, including issuers and distributors of stablecoins. This move is anticipated to foster a more secure environment for users engaged in stablecoin transactions.
If implemented, the legislation could mirror the shifts experienced in Europe following the introduction of comprehensive regulations under the Markets in Crypto-Assets (MiCA) framework. Research has indicated that the enforcement of MiCA led to significant changes in the stablecoin market, paving the way for compliant issuers to thrive while others, like Tether’s EURO -backed stablecoin, ceased operations. As Hong Kong advances toward clearer regulatory guidelines, the region may witness similar developments in the stablecoin ecosystem.
