The legislation establishes a comprehensive licensing regime for fiat-referenced stablecoins (FRS), digital currencies designed to maintain stable value against traditional currencies.

Stablecoins have emerged as a crucial component of cross-border payments and international trade settlement in recent years, as they can offer near-instantaneous transfers with minimal foreign exchange (FX) volatility.

Under the new Stablecoins Ordinance, any entity issuing stablecoins linked to the Hong Kong dollar or operating within Hong Kong’s jurisdiction must secure a licence from the Monetary Authority (MA). Licensees will face stringent requirements regarding reserve asset management, redemption mechanisms, and client asset segregation.

“With Hong Kong’s landmark Stablecoins Ordinance, the upcoming Genius Act in the United States, and the developments in the Middle East, we are witnessing a watershed moment in financial innovation. The convergence of these regulatory frameworks across major economies signals that the time for stablecoins to emerge as a legitimate cornerstone of the global financial infrastructure is now,” said Bertrand Chen, CEO at Global Shipping Business Network (GSBN). “The real impact lies in its adoption with the electronic Bill of Lading (eBL), which will unlock new value for participants in the multi-trillion-dollar global trade ecosystem.”

The legislation specifically mandates that FRS issuers maintain stabilisation mechanisms robust enough to process redemption requests at par value under reasonable conditions. Additional requirements cover anti-money laundering (AML) protocols, risk management, public disclosure, and regular auditing.

The new regulations also include substantial consumer protections. Only licensed institutions may offer stablecoins in Hong Kong, with retail investor access restricted to officially licensed products. To combat potential fraud, the legislation prohibits advertisements for unlicensed stablecoin issuances, even during the six-month transitional period.

Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, emphasised the balanced approach taken. “The Ordinance has established a risk-based, pragmatic, and flexible regulatory regime. We believe that a robust and fit-for-purpose regulatory environment would provide favourable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the broader digital asset ecosystem,” he said.

The ordinance forms part of a broader regulatory roadmap. Officials confirmed that consultations on virtual asset over-the-counter trading and custodian services will commence shortly, followed by a second policy statement outlining the territory’s strategic vision for virtual asset development.

The new licensing regime is expected to take effect later this year, with transitional arrangements allowing existing operators time to apply for licences and adjust their operational frameworks to meet the new standards.

“This regulatory framework adheres to the ‘same activity, same risks, same regulation’ principle,” said Christopher Hui, Secretary for Financial Services and the Treasury. This aligns with international regulatory requirements and “lays a solid foundation for Hong Kong’s virtual asset market, which, in turn, promotes the sustainable development of the industry, protects users’ rights and interests.” Hong Kong appears to be positioning itself as a trusted hub for this emerging payment rail.