Hong Kong’s Legislative Council passed a law late Wednesday to regulate fiat-backed stablecoins. The newly approved Stablecoins Ordinance introduces a mandatory licensing regime for entities issuing fiat-referenced stablecoins (FRS) either in Hong Kong or pegged to the Hong Kong dollar, even if issued abroad.
Per a Hong Kong government statement, issuers must now obtain authorization from the Monetary Authority, which applies to any party engaged in issuing FRS as part of their business operations.
It also mandates financial firms to follow the FRS’s legislation on reserve asset management, redemption policies, anti-money laundering controls, risk management protocols, disclosure practices, and auditing standards. They must have contingency plans to stabilize the stablecoin’s price in case of a depeg and meet conditions for redeeming tokens at par value.
Hong Kong treasury enacts stablecoin regulatory framework
Christopher Hui, Secretary for Financial Services and the Treasury, said the ordinance follows a “same activity, same risks, same regulation” philosophy. According to Hui, the new framework is a “fit-for-purpose regulatory environment,” which protects users and helps the virtual asset business grow sustainably.
Under the law, only licensed institutions may offer stablecoins to retail investors, and all advertising related to stablecoin issuance must come from authorized entities.
It is scheduled to take effect later in 2025, with transitional measures to help issuers submit license applications in accordance with the new rules.
The Monetary Authority will proceed with discussions to determine the specific details of the regulatory bill. Hong Kong officials also plan to issue a second policy statement on the development of cryptocurrencies and hold public discussions on over-the-counter and custodian services for the assets.
“Stablecoin legislation is being reviewed around the world,” said Robert Lee Wai-wang, a Legislative Council member and chairman of the Hong Kong-based Grand Finance Group. “Hong Kong is taking the right step in ensuring the markets are probably regulated. This latest development will help Hong Kong be more conducive to developing virtual-asset trading.”
Katerine Kou, chairwoman of the Hong Kong Securities Association and CEO of Victory Securities, reiterated that stablecoins are foundational to the digital asset trading market.
Hong Kong’s environment is crypto-friendly
In late April, a report by migration platform Multipolitan ranked the city second in its “Crypto Friendly Cities Index,” trailing only Ljubljana, Slovenia. The index evaluated cities based on their crypto-related laws, digital infrastructure, tax frameworks, and market depth.
Hong Kong ranks third globally, with the average crypto holder reportedly owning US$97,500 in virtual assets. Slovenia and Cyprus took the top two spots in that metric.
Multipolitan’s report also mentioned that high-net-worth individuals and crypto “whales” are seeking residency in tax-neutral jurisdictions. Dubai, for example, is a residential pick for wealthy crypto investors, aided by its Golden Visa program that grants a 10-year residency in exchange for an investment of AED 2 million (US$544,500).
Crackdown on crypto crime breeds regulatory need
Hong Kong’s Commercial Crime Bureau dismantled a cross-border money laundering syndicate last Monday that used crypto to obscure the origins of illicit funds.
Twelve suspects, nine men and three women aged between 20 and 40, were arrested in coordinated raids across multiple districts. Authorities seized HK$1.05 million in cash, over 560 bank cards, financial documents, and digital devices.
The syndicate is accused of recruiting Chinese nationals to open fraudulent bank accounts in Hong Kong since mid-2023. The accounts were then used to channel proceeds from scams, reportedly laundering more than HK$118 million (US$15 million) through over 550 domestic accounts. Funds were withdrawn and converted into crypto to conceal their source.
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