Hong Kong Stablecoins Bill Passed, Creating HKMA Licensing for Fiat-Backed Issuers

The Government described the regime as following the principle of "same activity, same risks, same regulation". The Ordinance is expected to take effect later in 2025, with transitional arrangements to help the industry apply for licences.

What licensees must do

Licensed issuers must meet requirements on the management of reserve assets and redemption, segregation of client assets, a robust stabilisation mechanism and redemption at par value on reasonable conditions, as well as anti-money laundering and counter-terrorist financing, risk management, disclosure, audit and fitness and propriety standards. The Legislative Council Brief on the bill as introduced explains that the market value of the reserve pool must at all times be at least equal to the par value of the stablecoins in circulation, that licensees must have a physical presence in Hong Kong and that the minimum paid-up share capital was set at HK$25 million.

Offering and advertising restrictions

Only specified licensed institutions may offer an FRS in Hong Kong, and only stablecoins issued by licensed issuers may be offered to retail investors. To counter fraud, only advertisements relating to licensed FRS issuance are permitted at all times, including during the six-month non-contravention period for pre-existing issuers. Under the bill as introduced, those pre-existing issuers with a meaningful and substantial presence in Hong Kong could keep operating for six months if they applied for a licence within the first three months, received the regulator's acknowledgment and undertook that they could comply.

Enforcement

The Hong Kong Stablecoins Bill, as introduced, gave the Monetary Authority power to suspend or revoke licences and to impose pecuniary penalties of up to HK$10 million or three times the profit gained or loss avoided, whichever is greater. Unlicensed activity was made a criminal offence carrying, on conviction on indictment, a fine of HK$5 million and seven years' imprisonment. A review tribunal will hear challenges to the regulator's decisions.

What happens next

The HKMA will consult on detailed requirements before commencement. Prospective issuers, banks and platforms planning stablecoin distribution in Hong Kong should prepare licence applications, reserve and redemption arrangements and financial crime controls ahead of the start date.

Sources

• Hong Kong Monetary Authority: Government welcomes passage of the Stablecoins Bill
• Legislative Council: Legislative Council Brief, Stablecoins Bill