Hong Kong passes stablecoin legislation, paving the way for RMB stablecoin

The Hong Kong Legislative Council passed the "Stablecoin Ordinance Bill" on May 21, marking the official establishment of a licensing system for stablecoin issuers in Hong Kong. This initiative aims to improve the regulatory framework for virtual assets while promoting financial innovation and maintaining financial stability. The Hong Kong SAR government expects the ordinance to take effect within this year.

The draft regulation clearly specifies three types of activities that require a license: issuing fiat stablecoins in Hong Kong, issuing Hong Kong dollar stablecoins in Hong Kong or overseas, and actively promoting the issuance of fiat stablecoins to the public in Hong Kong. The draft imposes strict requirements on stablecoin issuers, including maintaining sufficient reserve assets, ensuring redemption rights for stablecoin holders, and complying with anti-money laundering regulations.

To protect the interests of the public and investors, the regulations stipulate that only designated licensed institutions can sell fiat stablecoins in Hong Kong. These institutions include stablecoin issuers licensed by the Financial Secretary, banks, institutions holding Type 1 licenses issued by the Securities and Futures Commission, and licensed virtual asset trading platforms. The regulations also establish severe penalties, with hefty fines and imprisonment for unlicensed operations or illegal sales of stablecoins.

Currently, the Hong Kong Monetary Authority has launched a stablecoin issuer sandbox program, and three institutions have been approved to enter the testing phase. These institutions include a team composed of Standard Chartered Hong Kong, Anqi Group, and Hong Kong Telecommunications, as well as JD Coinchain Technology (Hong Kong) and Yuan Coin Innovation Technology.

It is worth noting that in addition to the Hong Kong dollar and the US dollar, the Renminbi is also expected to be included in Hong Kong's stablecoin system. Member of the Legislative Council and Chairman of the Stablecoin Regulation Drafting Committee, Mr. Kenneth Lau, stated his support for incorporating the Renminbi into the locally issued stablecoin system, believing that this will strengthen Hong Kong's role as a digital bridge connecting the mainland and other countries, attract more blockchain projects and institutional investors, and promote the internationalization of the Renminbi.

Member Qiu Dagen also called on the government to maintain an open and flexible attitude in its licensing policy, allowing more capable and resourceful institutions to participate in competition. He believes that through healthy competition, Hong Kong has the opportunity to develop an internationally accepted stablecoin market that may feature currencies other than the US dollar, which is of great significance for Hong Kong's financial development.

With the implementation of regulatory systems for virtual asset trading platforms and stablecoin issuers, the Hong Kong Monetary Authority has stated that the government will continue to support the development of the virtual asset industry. Next, the government will conduct consultations on over-the-counter trading and custody services for virtual assets and issue a second policy declaration on the development of virtual assets.

The passage of this bill coincides with the progress of the U.S. GENIUS Act stablecoin bill in the Senate, demonstrating global attention to stablecoin regulation. This move by Hong Kong is expected to not only promote local financial innovation but also potentially take a significant position in the global stablecoin competition.