Hong Kong to launch stablecoin licensing regime in August

Hong Kong’s stablecoin licensing regime is set to go live on August 1, a move confirmed by Secretary for Financial Services and the Treasury, Christopher Hui.

Speaking at the Hong Kong Digital Finance Awards on July 3, Hui stated the region is committed to building a comprehensive virtual asset ecosystem through a prudent regulatory regime that fosters market innovation.

The new regulations are a central part of Hong Kong’s updated digital asset agenda, “Policy Statement 2.0,” which was released in late June and builds upon a framework from October 2022. This policy establishes the “LEAP” framework, a strategy focused on Legal streamlining, Expanding tokenized products, Advancing use cases, and People and partnership development.

Under the upcoming stablecoin ordinance, any entity issuing fiat-referenced stablecoins in Hong Kong must acquire a license from the Hong Kong Monetary Authority (HKMA). As detailed in official government documents, a key rule is the requirement for stablecoins to be fully backed by reserves of high-quality, liquid assets. This measure is designed to protect investors and ensure financial stability.

The push for a regulated stablecoin market is coupled with a significant focus on tokenizing real-world assets (RWA). Per OpenGov Asia, the government plans to regularize the issuance of tokenized government bonds and promote tokenizing other assets, such as precious metals, to improve liquidity and market access. In support of this, the Financial Services, the Treasury Bureau, and the HKMA are conducting a legal review to streamline regulatory processes for tokenized instruments.

To further develop the market, authorities have clarified the stamp duty treatment for tokenized ETFs to encourage secondary market trading and are drafting regulations for tax incentives on profits from certain blockchain activities.

Major tech firms like Ant Group have already signaled their intent to apply for a stablecoin issuance license once the new regime is active.

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