On June 23, the Hong Kong Monetary Authority (hereinafter referred to as "HKMA") President Eddie Yue published an article titled "The Soundness and Sustainable Development of Stablecoins." Eddie Yue stated that the Hong Kong "Stablecoin Ordinance" (hereinafter referred to as "the Ordinance") will come into effect on August 1, at which point the HKMA will begin accepting license applications. Eddie Yue mentioned that the Ordinance further improves the regulatory framework for digital asset activities in Hong Kong to safeguard monetary and financial stability, and to strengthen and enhance Hong Kong's status as an international financial center.
Yu Weiwen admitted that while he is pleased to see the public's interest in stablecoins, he also wants to cool down the enthusiasm for stablecoins so that people can view them more objectively and calmly. He stated that considering stablecoins are relatively new products, the risks involved in issuance, user protection, as well as the market's carrying capacity and long-term development, the licensing has quite high thresholds. The Hong Kong Monetary Authority expects that in the initial stage, it will at most issue a few licenses. Licensed stablecoin issuers must have real application scenarios, operate their business in a stable and sustainable manner, and also need to establish trust with market participants to ensure the acceptability of their stablecoins.
The following is the original text:
In May this year, the Legislative Council passed the "Stablecoin Ordinance", introducing a licensing system for stablecoin issuers pegged to fiat currency in Hong Kong. The ordinance further improves the regulatory framework for digital asset activities in Hong Kong to ensure monetary and financial stability, and to strengthen Hong Kong's position as an international financial center. The ordinance will come into effect on August 1, at which time the Monetary Authority will begin accepting license applications. Currently, the Monetary Authority is conducting market consultations on the specific guidelines for implementing the ordinance, aiming to establish the guidelines as soon as possible.
Latest Developments in International Market Stablecoins
At the same time as the legislative work in Hong Kong is completed, there are also new developments in overseas markets: the EU has implemented the Markets in Crypto-Assets Regulation (MiCA) in 2024; the US is also discussing legislation related to stablecoins and has made positive progress; a major stablecoin issuer went public in the US in early June, and its stock price recorded a good increase after the listing. In no time, the term "stablecoin" has suddenly gained popularity from the "coin circle" to the financial sector and then to society ── various media have emerged with analyses and comments on the basic knowledge dissemination, various application scenarios, the disruption of traditional payments, and even its strategic significance.
As the enforcer of the stablecoin regulatory system, we certainly welcome the public's interest in stablecoins, but in light of our responsibilities as regulators, I also want to cool things down a bit, allowing everyone to view stablecoins more objectively and calmly. The role and benefits of stablecoins have been discussed in various public documents during the legislative process, and with the recent heated discussions, I believe everyone has a certain understanding. Therefore, I will not discuss that further but will focus on our thoughts regarding risks, regulation, and future licensing approvals.
First, let's discuss the attributes of stablecoins. Stablecoins are not tools for investment or speculation; rather, they are one of the payment tools that utilize blockchain technology and do not have appreciation potential. Taking cross-border payments as an example, in addition to stablecoins, other new payment tools include the CBDC (Central Bank Digital Currency) networks established in cooperation with certain central banks, tokenized deposits planned for issuance by some international banks, and cross-border connections in fast payment systems, among others. Each of these payment tools has its own characteristics, with varying degrees of maturity, and their future development prospects are largely determined by market forces.
Stablecoins as a payment tool serve as a link between traditional finance and digital assets. With the expectation that stablecoins will be used more widely, how to properly manage various inherent and spillover risks is gradually becoming the focus of international regulation. The Monetary Authority has been actively involved in the work of international regulatory organizations, including the Financial Stability Board (FSB) under the G20, which released the "Global Regulatory Framework for Crypto-Asset Activities" in 2023. The framework provides a set of guiding international standards on how to regulate stablecoins, and Hong Kong's regulatory system is essentially based on this.
The Monetary Authority is currently leading the review work of the FSB on the implementation of the above framework globally. Stablecoins are relatively new financial instruments that possess the characteristics of traditional financial tools while also having their own uniqueness, such as anonymity and ease of cross-border use, which bring challenges in risk management, especially in terms of anti-money laundering. Therefore, at the international level, mutually learning from regulatory measures and exchanging experiences, and gradually establishing cross-border regulatory cooperation will help us create an environment conducive to the healthy and orderly development of stablecoins globally, reducing financial risks.
Initially, only a few stablecoin licenses will be issued
As an international financial center, Hong Kong is one of the regions that formulated regulatory systems for stablecoin issuers relatively early. The "Stablecoin Regulation" adheres to the principle of "same activities, same risks, same regulation," which not only meets international regulatory requirements but also aligns with local circumstances. While addressing risks related to financial stability, money laundering, and investor protection, it provides a stable foundation for the prudent and sustainable development of the industry.
Considering the relatively new nature of stablecoins, the risks involved in the issuance business, the protection of users, and the carrying capacity and long-term development of the market, there is a fairly high threshold for licensing, and we expect that only a few licenses will be granted at best in the initial stage. Licensed stablecoin issuers must have a proven use case to operate their business in a robust and sustainable manner, as well as build trust with market participants to make their stablecoins recognizable.
From the perspective of compliance, stablecoin issuers need to have sufficient supporting facilities and key capabilities and experience in different areas, such as reserve asset management and asset security systems, effective price stability mechanisms, comprehensive and feasible redemption policies, as well as technological security, risk management and control, and anti-money laundering capabilities. If the use case of stablecoins involves other jurisdictions, the license applicant must have a comprehensive compliance program and sufficient resources to ensure that he and his business partners hold the required licenses and comply with the relevant laws and regulations of Hong Kong and other jurisdictions when conducting stablecoin-related activities.
From the perspective of market development, the business sustainability of stablecoin issuers is influenced by various factors, including user scale, range of application scenarios, partner networks, and interest rate environment. To promote responsible and sustainable market development, applicants for licenses must demonstrate a concrete and feasible business plan, along with sufficient technical and financial resources to support operations, so that their business can operate sustainably and robustly. Specifically, applicants need to propose how to practically address pain points in economic and financial activities through stablecoins, and explain how to maintain sufficient usage in a compliant manner, as well as have enough resources to continue operations regardless of market conditions.
Gradually establish a regulatory system that fits local conditions
The Monetary Authority launched the "stablecoin issuer sandbox" at the beginning of last year, aiming to understand the business models of institutions planning to issue fiat stablecoins in Hong Kong, and to convey regulatory expectations and provide guidance. It is important to emphasize that entering the "sandbox" is not a prerequisite for future applications for stablecoin issuer licenses; on the other hand, even if participating institutions have entered the "sandbox", it does not mean that they will necessarily obtain a license. We will prudently consider all license applications according to consistent and rigorous standards.
Hong Kong is gradually establishing a regulatory system that is both suited to local conditions and follows international standards and practices, promoting the healthy, responsible, and sustainable development of digital assets in Hong Kong, further consolidating its position as an international financial center. As major global regions progressively push forward regulations related to stablecoins, Hong Kong will continue to cooperate with the international community to jointly promote financial stability and innovation.
View Original
The content is for reference only, not a solicitation or offer. No investment, tax, or legal advice provided. See Disclaimer for more risks disclosure.
Hong Kong Monetary Authority Chief: Initially only a small number of stablecoin licenses will be issued.
On June 23, the Hong Kong Monetary Authority (hereinafter referred to as "HKMA") President Eddie Yue published an article titled "The Soundness and Sustainable Development of Stablecoins." Eddie Yue stated that the Hong Kong "Stablecoin Ordinance" (hereinafter referred to as "the Ordinance") will come into effect on August 1, at which point the HKMA will begin accepting license applications. Eddie Yue mentioned that the Ordinance further improves the regulatory framework for digital asset activities in Hong Kong to safeguard monetary and financial stability, and to strengthen and enhance Hong Kong's status as an international financial center.
Yu Weiwen admitted that while he is pleased to see the public's interest in stablecoins, he also wants to cool down the enthusiasm for stablecoins so that people can view them more objectively and calmly. He stated that considering stablecoins are relatively new products, the risks involved in issuance, user protection, as well as the market's carrying capacity and long-term development, the licensing has quite high thresholds. The Hong Kong Monetary Authority expects that in the initial stage, it will at most issue a few licenses. Licensed stablecoin issuers must have real application scenarios, operate their business in a stable and sustainable manner, and also need to establish trust with market participants to ensure the acceptability of their stablecoins.
The following is the original text:
In May this year, the Legislative Council passed the "Stablecoin Ordinance", introducing a licensing system for stablecoin issuers pegged to fiat currency in Hong Kong. The ordinance further improves the regulatory framework for digital asset activities in Hong Kong to ensure monetary and financial stability, and to strengthen Hong Kong's position as an international financial center. The ordinance will come into effect on August 1, at which time the Monetary Authority will begin accepting license applications. Currently, the Monetary Authority is conducting market consultations on the specific guidelines for implementing the ordinance, aiming to establish the guidelines as soon as possible.
Latest Developments in International Market Stablecoins
At the same time as the legislative work in Hong Kong is completed, there are also new developments in overseas markets: the EU has implemented the Markets in Crypto-Assets Regulation (MiCA) in 2024; the US is also discussing legislation related to stablecoins and has made positive progress; a major stablecoin issuer went public in the US in early June, and its stock price recorded a good increase after the listing. In no time, the term "stablecoin" has suddenly gained popularity from the "coin circle" to the financial sector and then to society ── various media have emerged with analyses and comments on the basic knowledge dissemination, various application scenarios, the disruption of traditional payments, and even its strategic significance.
As the enforcer of the stablecoin regulatory system, we certainly welcome the public's interest in stablecoins, but in light of our responsibilities as regulators, I also want to cool things down a bit, allowing everyone to view stablecoins more objectively and calmly. The role and benefits of stablecoins have been discussed in various public documents during the legislative process, and with the recent heated discussions, I believe everyone has a certain understanding. Therefore, I will not discuss that further but will focus on our thoughts regarding risks, regulation, and future licensing approvals.
First, let's discuss the attributes of stablecoins. Stablecoins are not tools for investment or speculation; rather, they are one of the payment tools that utilize blockchain technology and do not have appreciation potential. Taking cross-border payments as an example, in addition to stablecoins, other new payment tools include the CBDC (Central Bank Digital Currency) networks established in cooperation with certain central banks, tokenized deposits planned for issuance by some international banks, and cross-border connections in fast payment systems, among others. Each of these payment tools has its own characteristics, with varying degrees of maturity, and their future development prospects are largely determined by market forces.
Stablecoins as a payment tool serve as a link between traditional finance and digital assets. With the expectation that stablecoins will be used more widely, how to properly manage various inherent and spillover risks is gradually becoming the focus of international regulation. The Monetary Authority has been actively involved in the work of international regulatory organizations, including the Financial Stability Board (FSB) under the G20, which released the "Global Regulatory Framework for Crypto-Asset Activities" in 2023. The framework provides a set of guiding international standards on how to regulate stablecoins, and Hong Kong's regulatory system is essentially based on this.
The Monetary Authority is currently leading the review work of the FSB on the implementation of the above framework globally. Stablecoins are relatively new financial instruments that possess the characteristics of traditional financial tools while also having their own uniqueness, such as anonymity and ease of cross-border use, which bring challenges in risk management, especially in terms of anti-money laundering. Therefore, at the international level, mutually learning from regulatory measures and exchanging experiences, and gradually establishing cross-border regulatory cooperation will help us create an environment conducive to the healthy and orderly development of stablecoins globally, reducing financial risks.
Initially, only a few stablecoin licenses will be issued
As an international financial center, Hong Kong is one of the regions that formulated regulatory systems for stablecoin issuers relatively early. The "Stablecoin Regulation" adheres to the principle of "same activities, same risks, same regulation," which not only meets international regulatory requirements but also aligns with local circumstances. While addressing risks related to financial stability, money laundering, and investor protection, it provides a stable foundation for the prudent and sustainable development of the industry.
Considering the relatively new nature of stablecoins, the risks involved in the issuance business, the protection of users, and the carrying capacity and long-term development of the market, there is a fairly high threshold for licensing, and we expect that only a few licenses will be granted at best in the initial stage. Licensed stablecoin issuers must have a proven use case to operate their business in a robust and sustainable manner, as well as build trust with market participants to make their stablecoins recognizable.
From the perspective of compliance, stablecoin issuers need to have sufficient supporting facilities and key capabilities and experience in different areas, such as reserve asset management and asset security systems, effective price stability mechanisms, comprehensive and feasible redemption policies, as well as technological security, risk management and control, and anti-money laundering capabilities. If the use case of stablecoins involves other jurisdictions, the license applicant must have a comprehensive compliance program and sufficient resources to ensure that he and his business partners hold the required licenses and comply with the relevant laws and regulations of Hong Kong and other jurisdictions when conducting stablecoin-related activities.
From the perspective of market development, the business sustainability of stablecoin issuers is influenced by various factors, including user scale, range of application scenarios, partner networks, and interest rate environment. To promote responsible and sustainable market development, applicants for licenses must demonstrate a concrete and feasible business plan, along with sufficient technical and financial resources to support operations, so that their business can operate sustainably and robustly. Specifically, applicants need to propose how to practically address pain points in economic and financial activities through stablecoins, and explain how to maintain sufficient usage in a compliant manner, as well as have enough resources to continue operations regardless of market conditions.
Gradually establish a regulatory system that fits local conditions
The Monetary Authority launched the "stablecoin issuer sandbox" at the beginning of last year, aiming to understand the business models of institutions planning to issue fiat stablecoins in Hong Kong, and to convey regulatory expectations and provide guidance. It is important to emphasize that entering the "sandbox" is not a prerequisite for future applications for stablecoin issuer licenses; on the other hand, even if participating institutions have entered the "sandbox", it does not mean that they will necessarily obtain a license. We will prudently consider all license applications according to consistent and rigorous standards.
Hong Kong is gradually establishing a regulatory system that is both suited to local conditions and follows international standards and practices, promoting the healthy, responsible, and sustainable development of digital assets in Hong Kong, further consolidating its position as an international financial center. As major global regions progressively push forward regulations related to stablecoins, Hong Kong will continue to cooperate with the international community to jointly promote financial stability and innovation.