Following is a question by Dr the Hon Johnny Ng and a reply by the Secretary for Financial Services and the Treasury, Mr Christopher Hui, in the Legislative Council today (July 2):
 
Question:
 
     The Stablecoins Bill, passed in May this year, aims to establish a licensing and regulatory regime for fiat-referenced stablecoins issuers in Hong Kong. There are views that this marks a milestone in the global development of Web3 and represents an important step in Hong Kong's journey to becoming an international Web3 hub. In this connection, will the Government inform this Council:
 
(1) of ways to promote the expansion of stablecoin use cases, including fostering connections between stablecoin issuers and application scenarios on the Mainland, so as to facilitate the transition of stablecoins from regulatory compliance to establishment of business ecosystems;
 
(2) how the Government will leverage the implementation of the Stablecoins Ordinance to promote the openness and flexibility of Hong Kong's stablecoin laws and regulations internationally, while also synergising with Hong Kong's advantages under "one country, two systems" as well as its status as an international financial centre which is conducive to stablecoin development, to attract global compliant stablecoin issuers and large-scale international financial institutions to issue stablecoins and establish a presence in Hong Kong; and
 
(3) whether it will make preparations for the development of offshore Renminbi (RMB) stablecoins, including seeking support from the Central Authorities so as to establish the creditworthiness of Hong Kong's offshore RMB stablecoins?
 
Reply:
 
President,
 
     In May this year, the Legislative Council passed the Stablecoins Bill, establishing a licensing regime for issuers of fiat-referenced stablecoins (FRS) in Hong Kong. The ordinance further strengthens the regulatory framework for digital asset activities in Hong Kong to safeguard monetary and financial stability, as well as consolidates and enhances Hong Kong's position as an international financial centre. The Stablecoins Ordinance will come into effect on August 1 this year, at which the Hong Kong Monetary Authority (HKMA) will begin accepting licence applications. Currently, the HKMA is conducting a public consultation on the detailed guidelines for implementing the Ordinance with a view to finalising these guidelines as soon as practicable.
 
     Having consulted the HKMA, my reply to the various parts of the question is as follows:
 
(1) To harness the potential of stablecoins, the Government and regulators will provide a conducive environment and necessary regulatory guidance to enable licensed stablecoin issuers in Hong Kong to explore and implement different stablecoin use cases, with a view to addressing real-world pain points in economic activities, putting forward regulatory priorities for potential risks, and promoting the sustainable development of the market.
 
     To this end, the HKMA launched the stablecoin issuer sandbox early last year to allow the HKMA to understand the business models of institutions planning to issue FRS in Hong Kong, and to communicate regulatory expectations and provide guidance, while also fostering the development of practical use cases for stablecoins. With both local and global backgrounds, the participating institutions come from a wide spectrum of industries, including cross-border e-commerce and logistics, innovation and technology, banking and telecommunications services. The sandbox enables participants to conduct testing on their proposed use cases and operations within a limited scope and in a risk-controlled environment. Participation in the sandbox is not a prerequisite for licence application in the future.
 
     Furthermore, the Government recently issued the Policy Statement 2.0 on the Development of Digital Assets in Hong Kong. It covers the policy direction for advancing digital asset use cases and cross-sectoral collaboration, and articulates the exploration of stablecoins as a payment tool. To demonstrate the Government's support and to take the lead, in the Policy Statement 2.0 the Government invites proposals from market participants on how the Government may test the usage of licensed stablecoins, for example in enhancing efficiency of Government payments.
 
     Alongside market and use case development, it is also important to ensure compliance in business operation. Stablecoin issuers must demonstrate adequate setup, capabilities and experience across a range of areas, including management and security of reserve assets, effective price stabilisation mechanisms, comprehensive and feasible redemption policies, as well as capabilities in technological security, risk management, and anti-money laundering. Where the use cases of stablecoins involve cross-border activities, applicants are also expected to develop a comprehensive compliance plan, demonstrate their financial strength, and ensure that they and their business partners have the necessary regulatory approvals and will comply with applicable regulations in Hong Kong and other jurisdictions, when they carry out activities related to their stablecoins.
 
(2) The Financial Services and the Treasury Bureau (FSTB) and the HKMA have been proactively communicating with stakeholders in Hong Kong and other jurisdictions on the regulation and development of stablecoins, including potential stablecoin issuers, market participants, and professional service providers.
 
     Along with the upcoming implementation of the Stablecoins Ordinance, we will further enhance our engagement with various stakeholders across the globe to elaborate on Hong Kong's regulatory framework for stablecoin issuers, and highlight the balanced approach of our framework in managing risks while promoting industry development, such as adopting a more open model that allows licensed issuers to peg their stablecoins to different fiat currencies for the purpose of stablecoin issuance.
 
     We will also continue to promote Hong Kong's unique advantages as an international financial centre, including our close connection with the international markets, mature financial market and infrastructure, comprehensive legal system, and a wealth of professional talents, through overseas visits and on-going work exchanges. The Government's recent promulgation of the Policy Statement 2.0 also demonstrates to the digital asset and related sectors around the world our steadfast commitment and policy direction to establish Hong Kong as a global digital asset hub.
 
(3) The licensing regime for stablecoin issuers in Hong Kong is flexible and open, allowing licensed issuers to peg their stablecoins to different fiat currencies for the purpose of stablecoin issuance. We welcome institutions from around the world to apply for licence based on their actual business needs. We will review licence applications with a set of common standards, such as the issuer's compliance with regulatory requirements in the areas of reserve asset management, stabilisation mechanisms, redemption arrangements and internal control measures. The Government and financial regulators will closely monitor regulatory developments and maintain communications with regulatory authorities in different jurisdictions.
 
     The digital asset market is developing and evolving rapidly. Guided by the principle of "same activity, same risks, same regulation" and adopting a risk-based approach, the Government will continue to enhance and establish a regulatory regime that reflects local circumstances and aligns with international standards and practices, with a view to promoting the healthy, responsible and sustainable development of the digital asset market in Hong Kong, thereby further strengthening Hong Kong's status as an international financial centre.
 
     Thank you, President.

Ends/Wednesday, July 2, 2025
Issued at HKT 14:54

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