Hong Kong embraces the digital era by establishing groundbreaking regulations for stablecoins
Hong Kong Introduces Regulation for Stablecoin Issuance
In a significant move, the Legislative Council of Hong Kong has approved the Stablecoins Bill, which is set to come into effect this year. The new regulation aims to protect investors and users by ensuring transparency and accountability in the issuance and management of digital assets, particularly stablecoins.
The new regulation establishes a clear and competitive framework for stablecoin issuers, attractive to international companies and investors. Any entity issuing stablecoins in Hong Kong must obtain a license from the Hong Kong Monetary Authority (HKMA).
The regulation strengthens financial stability in Hong Kong and promotes the city's innovation, reinforcing its position as a global financial center that embraces technological innovation, particularly in the Web3 ecosystem. The Hong Kong Bills Committee has issued a report detailing the new regulation for stablecoin issuers in the city.
The Stablecoins Bill is part of Hong Kong's strategy to become a leading financial and technological center in Asia. It paves the way for the issuance of stablecoins backed by fiat currencies, reducing typical volatility and making them more suitable for everyday use.
To obtain a stablecoin license in Hong Kong, applicants must meet specific requirements. These include maintaining a minimum capital threshold of HKD 25 million, full reserve backing, client asset segregation, redemption guarantees, robust internal controls, risk management systems, and governance frameworks. Comprehensive anti-money laundering and counter-terrorist financing controls are also mandatory.
The HKMA provides guidelines and explanatory notes on licensing procedures and transitional arrangements for pre-existing issuers, encouraging early engagement for applicants. The approval of the Stablecoins Bill positions Hong Kong to compete with other advanced jurisdictions such as the European Union, the United States, and the United Kingdom.
The new stablecoins legislation aligns with international best practices and establishes a safe environment for the development of the virtual assets industry. By establishing a rigorous licensing regime aligned with international standards for stablecoins, the city strengthens its Web3 ecosystem and global competitiveness.
The Stablecoins Bill sets a stringent regulatory framework for stablecoin issuers in Hong Kong, primarily for the Hong Kong dollar. The new regulation establishes strict controls and facilitates innovation in the Web3 space, encompassing decentralized technologies and blockchain-based applications. The bill aims to protect investors and users while promoting financial stability and technological innovation in Hong Kong.
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