Reed Smith In-depth

Key takeaways

  • Stablecoins Bill will create a new licensing regime in Hong Kong
  • Entities must meet various requirements to issue or actively market fiat-referenced stablecoins in Hong Kong
  • Entities not in Hong Kong but wishing to issue Hong Kong dollar-denominated coins must also comply
  • Reserve assets requirements are stringent, as expected

Introduction

Entities wishing to issue or offer stablecoins marketed in Hong Kong will soon have to comply with stringent requirements under the Stablecoins Bill, published in December 2024.

The Bill comes at a time when stablecoins are in the spotlight globally, with the EU’s Markets in Crypto-Assets Regulation (MiCA) coming into force at the end of 2024. Exchanges, issuers and market players are increasingly focused on compliance, in order to thrive in regulated environments.

History of the Bill

In our previous client alerts1, we set out plans by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB) to establish a regulatory regime for fiat-referenced stablecoins (FRS) in Hong Kong (the Proposed Regime).

Following the release of a consultation paper on 27 December 2023, which received 108 responses from the public, and the consultation conclusions published by the HKMA and FSTB on 17 July 2024, the Bill was gazetted and introduced into Hong Kong’s Legislative Council for its first reading on 18 December 2024. As described below, the Bill reflects regulators’ commitment to regulating FRS activities in Hong Kong.