Hong Kong Passes Stablecoin Bill Aiming to Lead Digital Finance

On May 21, Johnny Ng Kit-chong announced on social media that the Hong Kong Stablecoin Bill had successfully passed its final reading. This legislative milestone is a significant step towards establishing Hong Kong as a leading hub for digital finance. The new law allows institutions to apply for licenses to issue stablecoins by the end of the year, with the aim of attracting international participants and fostering the growth of blockchain applications in the region. Policy experts believe this move could reshape the evolution of financial technology in Asia, with new use cases expected to emerge once the regulations take effect.

The Hong Kong Stablecoin Bill introduces clear guidelines for the issuance and management of specified stablecoins. These stablecoins maintain their value by being pegged to fiat currency or other stable assets, excluding those backed by central banks or covered by existing regulations. The framework is designed to protect holders and ensure transparency in stablecoin operations, aiming to mitigate risks associated with unbacked or poorly managed tokens. Issuers must meet stringent standards to obtain a license to operate.

Entities seeking to issue specified stablecoins must first obtain approval from the monetary authority. Unlicensed parties are prohibited from offering or advertising stablecoins to the public. Licensed issuers are required to register as corporations and maintain robust financial reserves, with liquid assets equal to the stablecoins issued kept separate from other corporate funds. This measure is intended to safeguard stablecoin holders in the event of an issuer's insolvency. Compliance standards include regular submission of detailed financial reports to the regulator.

Licensed issuers must provide fair and clear terms for stablecoin redemption, allowing holders to access reserve assets proportionally to their holdings in insolvency situations. Issuers are also required to publish whitepapers detailing their operations and risk controls, including redemption processes and reserve management methods. Any major organizational changes must be promptly reported to the regulator, and approval is needed before appointing key senior executives. This emphasis on transparency aims to build confidence in the practices of stablecoin issuers. Regulators can request additional disclosures if significant risks are identified.

The monetary authority has the power to issue, suspend, or revoke licenses under the new law. It can also appoint managers and investigate potential legal breaches, with penalties applicable for serious violations. The law establishes a Stablecoin Review Tribunal to oversee regulatory decisions, with the option for parties to appeal tribunal rulings to the local court of appeal. This multi-layered review system aims to maintain accountability and transparency, reinforcing trust in the stablecoin issuance process and protecting market integrity and consumer interests.

Johnny Ng Kit-chong emphasized that the passage of this law is just the beginning of potential initiatives. He highlighted the potential for stablecoins to be used in real-world retail payments, cross-border trade, and peer-to-peer transactions. The idea of interest earnings as a competitive tool was also mentioned, aiming to foster sustainable growth within the digital finance sector and increase Hong Kong’s crypto adoption rate. These measures are expected to strengthen Hong Kong’s position in Web3 innovation by supporting real-world applications and building broader stakeholder confidence through regulatory clarity.

The new framework is poised to influence crypto adoption across various market sectors in Hong Kong. Clear laws are expected to provide investors with greater security in using virtual asset offerings, potentially attracting global companies interested in stablecoin services. While small startups may face high compliance costs, a strong legal foundation can improve trust and reduce overall financial risks. Experts view this model favorably compared to other regulatory systems in the Asia Pacific region. As Hong Kong finalizes these rules, it could lead the region in virtual asset growth.