This framework will provide the legal foundation for stablecoin regulation in Hong Kong.
Regulation for Stablecoins
Hong Kong is taking another bold step in its aspiration to establish itself as a global hub for digital assets. The city’s financial regulators are set to submit a draft of the “Stablecoin Regulatory Framework” to the Legislative Council for its first reading on Dec. 18, marking a critical step toward regulating the rapidly growing stablecoin market.
This move reflects Hong Kong’s proactive approach to balancing innovation and consumer protection in the crypto space. The purpose of the draft is to enhance the legal framework for virtual asset operations in order to mitigate the possible threats to financial stability posed by fiat-backed stablecoins, guarantee users’ sufficient security, and capitalize on the advantages that virtual assets and the technology that support them can offer.
Yu Weiwen, President of the Monetary Authority, said, “The legislative proposal has been extensively consulted and the industry’s opinions have been fully taken into account when determining the details of the regulatory system. We believe that a sound regulatory environment can help promote the sustainable and responsible development of the Hong Kong stable currency ecosystem.”
The proposed licensing system requires that anyone involved in issuing fiat-backed stablecoins in Hong Kong, fiat-backed stablecoins pegged to the Hong Kong dollar, and promoting the purchase of fiat-backed stablecoins in Hong Kong must first obtain a license from the Financial Management Commissioner.
The draft also suggests giving the Financial Management Commissioner the required enforcement, regulatory, and investigative authority in order to properly execute the system.
The “Stablecoin Regulatory Framework” draft represents a pivotal step toward fostering innovation while ensuring consumer protection and market stability. Its progress through the Legislative Council will be closely watched as a model for other countries navigating the complexities of stablecoin oversight.
