The Hong Kong stablecoin bill has officially taken effect, marking a significant step for the region’s digital currency landscape. Financial authorities have announced plans to start issuing stablecoin licenses early next year. Here’s what we know so far.
On August 1, Hong Kong’s first-ever Stablecoin Ordinance came into force, introducing a licensing system for issuers of fiat-backed stablecoins in the region. This new regulatory framework provides a formal pathway for stablecoin issuers to operate legally within Hong Kong.
According to a recent Reuters report, the Hong Kong Monetary Authority (HKMA) expects to grant the first batch of stablecoin issuer licenses in early 2024. Several prominent companies, including JD.com and Standard Chartered, have already shown interest in obtaining these licenses following the bill’s enactment.
Despite rising interest, HKMA Deputy Chief Executive Darryl Chan emphasized that only a limited number of licenses—“a handful”—will be granted in the initial round. The HKMA also cautioned industry players to be careful with public statements, warning against comments that might be misunderstood or set unrealistic expectations.
As of now, no stablecoin licenses have been issued. Institutions interested in applying must notify the HKMA by August 31. The application window for the first batch will remain open until September 30.
Chan noted that most applicants are looking to issue stablecoins pegged to the Hong Kong dollar or the U.S. dollar. However, stablecoins backed by the Chinese yuan will need to clearly define their use cases and disclose their asset reserves.
This development marks a key milestone in Hong Kong’s push to regulate and support the stablecoin market while ensuring investor protection and market stability.
What does it mean to hold a Hong Kong stablecoin issuer license?
As previously reported by crypto.news, once the stablecoin bill is fully implemented, companies will be able to apply for licenses to issue stablecoins pegged to the Hong Kong dollar. Holding a license will also permit them to operate and offer stablecoin services within the region.
The new licensing framework will restrict stablecoin advertising to licensed issuers only, aiming to reduce the risk of scams. Additionally, stablecoin issuers will be required to demonstrate that their stablecoins are fully backed by reserves on a 1:1 basis.
Another report from crypto.news revealed that the upcoming licensing system will use an invite-only approach, ensuring that only qualified industry players receive licenses in the first round of approvals.
According to an anonymous source, the HKMA plans to engage with potential issuers in advance to assess whether they meet the regulatory standards needed for stablecoin issuance.
Blocking VPN use among stablecoin users
According to the Stablecoin Ordinance licensing guidelines, the HKMA expects licensed stablecoin issuers to prevent the issuance or offering of specified stablecoins in jurisdictions where such trading is banned.
This means license holders must put in place safeguards to reduce the risk of customers accessing stablecoin services from restricted areas through virtual private networks (VPNs).
