The Hong Kong Monetary Authority (HKMA) is regulating a new stablecoin system through the Stablecoin Ordinance. This legislation will take effect in 2025, requiring companies to apply for a license before issuing stablecoins pegged to fiat currencies. The establishment of this framework aims to maintain financial stability while promoting innovation.
Although officials have not confirmed any successful applicants, insiders expect approvals to be granted within weeks. Reports suggest that the relevant authorities may announce the first batch of licenses around March 24.
The HKMA plans to approve only a few issuers in the first batch. Regulators believe that a small-scale launch will help closely monitor market activities.
Authorities are still evaluating applications submitted by banks and fintech companies, but the regulators intend to prioritize institutions already operating within the Hong Kong banking system. This strategy allows regulators to rely on companies that already meet stringent compliance standards. Furthermore, existing banks adhere to detailed regulatory rules under Hong Kong financial law.
Officials want to ensure that the issuance of stablecoins develops within a controlled regulatory framework. Therefore, the initial approvals will remain limited to assess operational risks.
HSBC and Standard Chartered may become the first issuers. Both banks play a central role in Hong Kong's monetary system.
Hong Kong has authorized three commercial banks to issue physical currency in the city, including HSBC, Standard Chartered, and Bank of China. Due to this role, regulators consider these institutions closely linked to the Hong Kong dollar system, thus viewing them as trusted participants in the stablecoin framework.
Standard Chartered has indicated plans to issue a stablecoin pegged to the Hong Kong dollar through a joint venture, while HSBC's potential approval is noteworthy for another reason. The bank did not participate in the HKMA's earlier stablecoin sandbox program, which allowed regulators to test potential stablecoin models with selected companies.
The Stablecoin Ordinance establishes a legal oversight framework that prohibits companies from promoting unlicensed stablecoins to retail investors. This rule is designed to prevent unregulated digital tokens from entering the local market.
Regulators hope that issuers seeking licenses will meet strict reserve and operational requirements. These rules aim to enhance investor protection and maintain confidence in the digital payment system. The new system is part of Hong Kong's financial innovation.