Stablecoins in Hong Kong will now be subject to new regulations, effective from August onwards.

Hong Kong has taken a significant step forward in the digital finance sector with the introduction of a new regulatory framework for stablecoin issuers, effective August 1, 2022. The framework, designed to foster a responsible and solid cryptocurrency ecosystem, aims to attract high-quality projects and expand institutional participation.

The new rules set rigorous standards for reserve management, internal controls, audits, and governance for stablecoin issuers. All stablecoins operating in Hong Kong must be fully backed by liquid and reliable assets, a measure aimed at promoting greater trust and transparency for users of stablecoins.

The framework also reaffirms Hong Kong's commitment to sustainable and orderly development of the crypto ecosystem, while preventing abuses and illicit activities. It combines strict supervision with strategic openness to foreign issuers, a move that is expected to position Hong Kong as a leader in digital finance.

Applicants for a stablecoin issuer license are recommended to contact the Hong Kong Monetary Authority (HKMA) before August 31 and submit their applications by September 30. Only authorized and monitored stablecoins operating under these rules will be legally allowed to operate in Hong Kong.

The first batch of licenses for stablecoin issuers is expected to be issued at the beginning of next year, with Standard Chartered and ICBC positioned as the leading candidates likely to receive the initial approvals. The new framework is seen as an indispensable foundation that provides confidence to investors, especially institutional funds.

The regulation aims to promote the professionalization of the sector and solidify Hong Kong's position as a leader in digital finance. It also lays a solid foundation for the future implementation of its own central bank digital currency.

The HKMA has published necessary documentation, including specific regulations, anti-money laundering measures, license details, and transitional agreements. The primary goal of the framework is to reduce financial risks and prevent fraud in the stablecoin market.

The new regulatory framework is part of Hong Kong's commitment to a solid and responsible technology industry. By keeping client funds separate from the issuer's resources, the framework ensures that the interests of users are protected. The regulation is designed to foster a responsible and solid cryptocurrency ecosystem in Hong Kong, attracting high-quality projects and fostering growth in the digital finance sector.