The Stablecoins Bill: a New Crypto Regime for Hong Kong
Hong Kong has taken a major step towards cementing its position as a major hub for cryptocurrencies by the publication of the Stablecoins Bill last month. The Bill had its first reading on 18 December 2024 and is anticipated to become law in the coming months.
The proposed regime is to licence stablecoins under the jurisdiction of the Hong Kong Monetary Authority (HKMA), which regulates all banking activities in Hong Kong.
In the Government's brief on the proposed Bill1, it recognises that stablecoins have the potential to develop into widely accepted means of payment and to play a significant role in the mainstream financial system. The brief acknowledges that this, in turn, could present a significant risk to that system unless action is taken to either bar stablecoins or else provide a regulatory regime for their operation in the local market. With the Bill, the latter is signalled as being Hong Kong's proposed course.
The Bill itself criminalises the offering or carrying on specified activities related to stablecoins2 without either a licence or a specific exemption granted by HKMA. It is to be noted that the offences extend to offerings made from outside Hong Kong that actively target the public here.
The licensing regime itself follows similar requirements already in operation for other licensing regimes in Hong Kong, such as for securities' intermediaries under the Securities and Futures Ordinance3. These requirements include vetting all directors to ensure that they are fit and proper, a prior approval process for significant shareholders, and ensuring that adequate financial resources are in place, alongside comprehensive AML and CFT requirements for licensed providers4.
In addition, whilst the Board members of any applicant are not required to be Hong Kong residents, the applicant must have three key managers who are resident here and who must also satisfy the fit and proper requirements5.
Stablecoin licences will only be granted to Hong Kong companies or overseas authorised institutions already licensed for banking activities by HKMA in Hong Kong. The licenses will be open ended but subject to revocation by HKMA6.
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The Stablecoin Bill represents a comprehensive framework operated under the jurisdiction of a well-respected regional regulator which, it is hoped, will provide an exciting next step in Hong Kong's bid to be a major player in the cryptocurrency markets whilst balancing the need to protect investors and the financial system against rogue players.
Chris Lambert
Robertsons offers a comprehensive range of regulatory services in the areas of Fintech, Regulatory Investigations & Proceedings, and Licensing & Compliance. The firm's Regulatory Investigations team handles inquiries and investigations by key regulatory bodies in Hong Kong, including the SFC, the Hong Kong Monetary Authority, the Hong Kong Stock Exchange and the Confederation of Insurance Brokers. Our Licensing & Compliance team assists clients in navigating complex regulatory requirements in Hong Kong's financial services sector, helping with licensing applications, compliance matters, and ongoing regulatory support for various financial institutions and listed companies in the region.
For more information on all securities, licensing and related matters in Hong Kong, please contact:-
Chris Lambert | clambert@robertsonshk.com | + 852 2861 8417
Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
1 Issued by the Financial Services and the Treasury Bureau on 11 December 2024: https://www.legco.gov.hk/yr2024/english/brief/bm4144c_20241211-e.pdf
2 See further detail in sections 8-13 of the Stablecoins Bill
3 Cap 571
4 See further detail in schedule 2 of the Stablecoins Bill
5 A CEO, an alternate CEO and a Stablecoin manager (see sections 63-70 of Stablecoins Bill)
6 A list of HKMA's powers is set out at sections 28-35 of the Stablecoins Bill