Hong Kong’s stablecoin law to take effect in August, building on virtual asset licensing

Hong Kong’s new stablecoin ordinance, which requires issuers of assets backed by fiat currency to be licensed, is set to take effect on August 1, according to a government announcement on Friday.

The city’s Legislative Council passed the bill regulating stablecoins – a type of cryptocurrency backed by a reference asset, usually fiat currencies such as the US and Hong Kong dollars – on May 21, but the government had not previously announced when it would take effect. The law requires a licence from the Hong Kong Monetary Authority to issue fiat-referenced stablecoins within the city or Hong Kong dollar-backed stablecoins anywhere.

“After the ordinance commences operation, the licensing regime will provide suitable guardrails for relevant stablecoin activities,” Treasury chief Christopher Hui Ching-yu said in a statement. “It will be a milestone in facilitating the sustainable development of the stablecoin and digital asset ecosystem in Hong Kong.”

The new regime gives Hong Kong one of the most comprehensive legal frameworks for stablecoins. It comes amid a global rush to regulate the digital assets that some fear could have destabilising effects on financial systems owing to the ease with which they allow money to cross borders. It also comes as US lawmakers continue to try to advance the stablecoin-focused Genius Act through Congress.

The stablecoin law is part of a broader effort by Hong Kong to become a cryptocurrency hub. Under a 2023 law regulating other virtual assets, crypto exchanges must be licensed by the Securities and Futures Commission. The government has said its next focus will be on regulating over-the-counter and custodian services for virtual assets.

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