Hong Kong’s government is in a rush to bring its stablecoin legislation into force. On 21 May the legislature approved the new law, and days later the Hong Kong Monetary Authority (HKMA) launched a consultation regarding the detailed rules, which runs until the end of June. Today the government published an ordinance signalling plans for the stablecoin law to commence on 1 August, provided the legislature doesn’t veto the timing.
At the same time the government also said it would allow professional investors (institutions) to use stablecoins that are not governed by the new laws.
This is another sign of a more relaxed approach to stablecoin regulations compared to other jurisdictions. When the HKMA opened the consultation we noted several permissive details such as the duration of securities used as part of the stablecoin’s reserves being up to a year rather than the 90 day norm. The HKMA also has considerable latitude to approve other business activities of the stablecoin issuer. Usually stablecoin reserves must match the currency of the stablecoin. However, Hong Kong Dollar stablecoins are allowed to use US dollars because of the currency peg. This flexibility aligns with Hong Kong’s goal to attract stablecoin business.
“After the Ordinance commences operation, the licensing regime will provide suitable guardrails for relevant stablecoin activities. It will be a milestone in facilitating the sustainable development of the stablecoin and digital asset ecosystem in Hong Kong.” said Christopher Hui, Secretary for Financial Services and the Treasury.
Jurisdictions vie for stablecoin issuers
Hong Kong’s moves come as the United States is progressing its Genius Act stablecoin legislation which may get a Senate vote next week. With a proliferation of new issuers, Hong Kong’s flexible regulatory approach aims to make it attractive. Hong Kong’s competitive positioning extends beyond stablecoins. Last year it launched a grant scheme to attract digital bond issuers, which was shortly followed by a similar scheme from Singapore.
