Hong Kong Passes Stablecoins Bill, Establishes Comprehensive Regulatory Regime

Hong Kong has solidified its position as a leading international hub for virtual assets with the passage of the Stablecoins Bill, now known as the Stablecoins Ordinance. The Ordinance introduces a licensing framework for stablecoin issuers and service providers, while setting out robust requirements for reserve management, redemption, risk controls, and governance. Key amendments to the Bill include refined definitions of "specified stablecoin" and "permitted offerors," as well as enhanced transparency in reporting financial distress and the imposition of sanctions.

Key Takeaways:

• The Stablecoins Ordinance establishes a comprehensive regulatory regime for stablecoins in Hong Kong, introducing a licensing framework for issuers and service providers.
• The Ordinance defines "specified stablecoin" as a stablecoin that maintains a stable value with reference to one or more fiat currencies, units of account, or stores of economic value.
• Notable amendments include expanded definitions of "permitted offerors" to include stored value facility licensees under the Payment Systems and Stored Value Facilities Ordinance.
• The Ordinance requires licensees to report financial distress "immediately" to the HKMA, replacing the subjective trigger in the Bill.
• Procedural requirements for imposing sanctions have been strengthened, including the provision of written notices to sanctioned regulated persons and the right to refer decisions to the Stablecoin Review Tribunal.
• The Ordinance establishes the Tribunal to review HKMA decisions, with express powers to stay the execution of decisions pending review.
• The HKMA has released draft guidelines and a consultation paper on proposed AML/CFT requirements for regulated stablecoin activities.

Statistics:

• The HKMA will accept feedback on the draft guidelines and consultation paper until 30 June 2025.
• Existing operators have a six-month transitional period to comply with the new regime, with the Ordinance coming into force on 1 August 2025.
• Additional consultations on stablecoin custody and over-the-counter services are anticipated.
• The HKMA will establish a comprehensive risk management framework for licensees, including regular stress testing, incident response planning, and robust internal controls.

Sources:

• HKSAR Government, "Stablecoins Bill gazetted in December 2024"
• Hong Kong Monetary Authority, "Draft Guideline on Supervision of Licensed Stablecoin Issuers"
• Hong Kong Monetary Authority, "Consultation Paper on Proposed AML/CFT Requirements"