The Hong Kong government has taken a significant step towards regulating the issuance of stablecoins in the region by publishing a ‘stablecoin bill’ in the Gazette on December 6. This bill, which will be presented to the Legislative Council for its first reading on December 18, aims to establish a regulatory framework for fiat currency stablecoin issuers in Hong Kong.
The drafted bill is designed to address the potential risks associated with fiat currency stablecoins while promoting financial stability and ensuring adequate protection for users. It also seeks to leverage the benefits of virtual assets and related technologies. The proposed licensing system outlined in the bill requires any person or entity engaged in issuing fiat currency stablecoins, claimed anchors, or actively promoting their stable currency to the Hong Kong public to obtain a license from the Monetary Authority.
In addition to the licensing requirements, the bill empowers the Monetary Authority with supervisory, investigative, and enforcement powers to establish an effective regulatory system. Secretary for Financial Services and the Treasury, Hui Ching-yu, emphasized the importance of this legislative proposal in fulfilling Hong Kong’s obligations as a member of the Financial Stability Board. He highlighted the risk-based approach of the proposal and reiterated Hong Kong’s commitment to creating a sound regulatory environment for virtual assets.
President of the Monetary Authority, Yu Weiman, expressed confidence in the proposed regulatory framework, stating that it was developed through extensive consultation with industry stakeholders. The goal is to foster a responsible stablecoin ecosystem in Hong Kong while ensuring sustainability and compliance with regulatory standards.
The move to regulate stablecoins is part of Hong Kong’s broader efforts to create a crypto-friendly environment that can compete with other Asian countries like Singapore. In a recent announcement, the Hong Kong government revealed plans to exempt hedge funds, private equity firms, and family offices from capital gains taxes on digital assets, including cryptocurrencies like Bitcoin. These initiatives signal Hong Kong’s commitment to embracing blockchain technology and digital assets while maintaining a robust regulatory framework.