Hong Kong's stablecoin ordinance, which seeks to establish a licensing regime for issuers of such stablecoins, is set to take effect on August 1.
The bill, which was passed by the Hong Kong Legislative Council back in May, aims to boost the regulatory framework for digital assets, safeguard financial stability, and solidify Hong Kong's position as a leading international financial center.
While the core features of the stablecoin bill include the mandatory licensing for stablecoin issuers, strict reserve asset requirements, redemption rights for holders, and broad enforcement powers for the Hong Kong Monetary Authority, the ordinance has seen some notable amendments:
- Refined Meaning of “Specified Stablecoin”: The bill defines a “specified stablecoin” as a stablecoin that purports to maintain a stable value with reference to one or more fiat currencies, or one or more specified units of account, or one or more stores of economic value (of a combination of any of these).
- Expanded Meaning of “Permitted Offerors”: Organisations that are “permitted offerors” within the meaning of the Bill/Ordinance are able to lawfully issue stablecoins. Under the Bill, only licensed stablecoin issuers and a narrow set of financial institutions could offer stablecoins to the Hong Kong public. The Ordinance expands the definition to include stored value facility (“SVF”) licensees under the Payment Systems and Stored Value Facilities Ordinance, recognising the evolving payments landscape and the role of SVFs in digital finance, broadening market access while maintaining regulatory oversight.
- Immediate and Objective Reporting of Financial Distress: Under the bill, a licensee was required report to the HKMA if “[a]s soon as practicable after it appears to a licensee that it is likely to become unable to meet its obligations, is insolvent or is about to suspend payment.” This has been replaced with an objective standard – a licensee must now report “immediately” to the HKMA when it is, in fact, unable to meet its obligations, is insolvent, or about to suspend payment. This removes ambiguity and ensures timely regulatory intervention.
- Procedural requirements for imposing sanctions: The ordinance introduces additional matters to be included in a written notice to the sanctioned regulated person – specifically, details as to the time at which the decision is to take effect; a statement that the person may refer the decision to the Stablecoin Review Tribunal (“Tribunal”) for review; and, in the event the sanction takes the form of a caution, warning, or reprimand, the terms in which the person is to be cautioned, warned, or reprimanded. These changes strengthen transparency and due process without altering the established process for the imposition of sanctions.
- Enhanced Powers for the Tribunal: The ordinance establishes the Tribunal to review HKMA decisions (for example, to revoke a licence, impose sanctions, designate an entity, or refuse certain consents). There is also an introduction of an express provision empowering the Tribunal to stay the execution of a HKMA decision, on application of the aggrieved party, pending the completion of the review.
