Hong Kong is moving swiftly to regulate stablecoins, signalling their potential integration into the region’s financial systems. Regulators have drafted a ‘Stablecoins Bill’ that sets forth mandates and restrictions for stablecoin issuers and advertisers. The bill outlines the necessary steps to ensure consumer protection for individuals engaging with stablecoins—crypto assets pegged to reserved assets, such as fiat currencies, to maintain price stability amid market fluctuations.
Hong Kong’s Stablecoins Bill was recently submitted to the Legislative Council, marking its first reading. After passing this stage, the bill will undergo two more readings by regulators before becoming law. Each reading will involve thorough discussions, assessments, and any necessary revisions, according to a report by CoinTelegraph.
What Does the Bill Entail?
The first draft of Hong Kong’s Stablecoin Bill was published in the official Gazette earlier this month. The bill outlines stricter licensing requirements for stablecoin issuers in the region. Violations of these licensing and approval regulations could result in fines of up to $50,000 (roughly Rs. 42.6 lakh) and prison sentences of up to two years. The Hong Kong Monetary Authority (HKMA) will oversee the approval of these license applications.
Only licensed entities will be legally permitted to market their stablecoins. Advertising unlicensed stablecoins could lead to penalties, including jail sentences of up to six months, as suggested by the bill. This targets not only unlicensed issuers but also the marketing agencies promoting them.
The primary objective of the bill is to protect individuals using stablecoins in everyday financial transactions from potential losses. Regulators will carefully evaluate issuers’ backgrounds, asset reserves, and operational frameworks before granting licenses.
The document, that is 285 pages long, aims to make stablecoins usable in Hong Kong for automating incentives, loyalty programmes, as well as rebates for the citizens, said a report by the South China Morning Post.
Revisiting Hong Kong’s Crypto Journey in 2024
Hong Kong, which ranked as the world’s most crypto-ready nation in the 2022 Worldwide Crypto Readiness Report, has begun cracking down on unregistered crypto businesses. The Securities and Futures Commission (SFC) of Hong Kong blocked a number of non-compliant crypto platforms in March. Regulators have also rejected all crypto businesses that delayed applying for official permits starting in June. The SFC has expedited audits of operational crypto firms to ensure compliance and identify rulebreakers.
In April, Hong Kong approved BTC and ETH spot ETFs – allowing investors to engage with crypto assets via traditional stock markets. Hong Kong’s largest digital bank – the ZA Bank – launched crypto trading services to individual, retail traders.
This year, Hong Kong also established a subcommittee focused on researching crypto regulations, with the goal of developing a comprehensive regulatory framework in the near future.
