Hong Kong Passes Stablecoins Bill Regulating FRS Issuance

The Legislative Council of Hong Kong has passed the Stablecoins Bill, which introduces a licensing regime for stablecoin issuers. This legislation is set to govern fiat-referenced stablecoins (FRS) and aims to enhance investor protection and financial stability in the region. Under the new regulations, any organization issuing an FRS in Hong Kong or linking it to the Hong Kong dollar must obtain a license from the Monetary Authority (MA). This requirement ensures that issuers handle and separate client funds appropriately and maintain the value of the stablecoin.

The Stablecoins Ordinance is scheduled to take effect by the end of this year, with a transitional period provided for businesses to adapt to the new rules. The legislation mandates that only licensed institutions can issue FRS in Hong Kong, thereby restricting the issuance of stablecoins to retail investors to licensed operators. Additionally, the advertising of FRS is regulated, allowing only licensed groups to promote their stablecoins. This measure is designed to deter fraud and reduce the risk of scams in the market.

Mr. Christopher Hui, the Secretary for Financial Services and the Treasury, emphasized that the Ordinance is based on the principle of “same activity, same risks, same regulation.” This approach aims to create a risk-based regulatory system that is flexible, understandable, and aligned with global standards. The new rules are expected to foster the steady and reliable growth of the digital asset ecosystem, positioning Hong Kong as a major center for digital finance.

The Chief Executive of Hong Kong expressed that the new regulations are practical and adaptable to specific needs. The government continues to engage with the industry to discuss further regulations related to virtual asset over-the-counter trading and custody services, supporting the overall development of the virtual asset sector. The passage of the Stablecoins Bill marks a significant step in strengthening virtual asset regulations in Hong Kong, placing the region at the forefront of global digital finance regulation.