The Legislative Council of the Hong Kong Special Administrative Region (HKSAR) passed the Stablecoins Bill on May 21, formulating a licensing regime for fiat-referenced stablecoins (FRS) issuers in Hong Kong.

This bill, rolled out to further enhance Hong Kong's regulatory framework on virtual-asset activities, thereby fostering financial stability and encouraging financial innovation, is expected to come into effect in 2025.

Upon implementation of the Stablecoins Ordinance, any person who, in the course of business, issues an FRS in Hong Kong, or issues an FRS that purports to maintain a stable value with reference to Hong Kong dollars in or outside Hong Kong, will need to obtain a licence from the Hong Kong Monetary Authority (HKMA).

The relevant persons must satisfy requirements in areas such as reserve asset management and redemption, including proper segregation of client assets, maintaining a robust stabilization mechanism, and processing stablecoin holders' requests for redemption at par value with reasonable conditions.

Christopher Hui, secretary for financial services and the treasury of the HKSAR government, said the ordinance adheres to the "same activity, same risks, same regulation" principle, with a focus on a risk-based approach to promote a robust regulatory environment.

This is not only in line with international regulatory requirements, but also lays a solid foundation for Hong Kong's virtual asset market, Hui noted.

Eddie Yue, chief executive of the HKMA, said that "We believe that a robust and fit-for-purpose regulatory environment would provide favourable conditions to support the healthy, responsible, and sustainable development of Hong Kong's stablecoin and the broader digital asset ecosystem."