Hong Kong Enacts the Stablecoins Bill into Law, Governing Fiat-Referenced Stablecoins

The Legislative Council of Hong Kong has enacted the Stablecoins Bill, which will govern fiat-referenced stablecoins (FRS). Under this legislation

The Legislative Council of Hong Kong has enacted the Stablecoins Bill, which will govern fiat-referenced stablecoins (FRS). The new legislation, introduced in response to the growing interest in virtual assets (VA), aims to boost financial stability and encourage new ideas in the virtual asset area, placing Hong Kong at the forefront of global digital finance regulation.

The bill mandates that any organization issuing an FRS in Hong Kong or linking it to the Hong Kong dollar must be licensed by the Monetary Authority (MA). Issuers will be required to properly handle and segregate client funds as mandated by the rules and create a robust method to maintain the value of the stablecoin.

Institutions must have a valid license to issue FRS in Hong Kong, and such operators will be the only ones permitted to provide stablecoins to retail investors. The advertising of FRS is also covered by the legislation, with only licensed groups allowed to advertise their stablecoins. This segment exists to deter fraud and reduce the risk of scams affecting the market.

Mr Christopher Hui, the Secretary for Financial Services and the Treasury, emphasized that the Ordinance employs the principle “same activity, same risks, same regulation.” The goal is to establish a regulatory system based on risk, flexible and easy to understand, and in line with global standards. As a result, Hong Kong’s virtual asset sector will continue to improve and enhance its leading role on the global stage.

The Chief Executive highlighted that the new rules are pragmatic and capable of being adapted to specific needs. He anticipates it will foster the steady and reliable growth of the digital asset ecosystem, aiding Hong Kong in becoming a major center for digital finance.

The Stablecoins Ordinance is set to begin operation by the end of the year, with a period of time being granted for companies to adjust to the new regulations. The Hong Kong government is also discussing further regulations with the industry regarding VA over-the-counter trading and custody services, in support of the virtual asset industry.