• Hong Kong lawmakers passed a stablecoin bill today in its third reading.
• The Stablecoins Ordinance requires stablecoin issuers to obtain a license from the Hong Kong Monetary Authority.

Hong Kong’s Legislative Council passed the long-anticipated stablecoin bill today, establishing a licensing regime for stablecoin issuers.

In a council meeting Wednesday, lawmakers passed the “Stablecoins Bill” in its third reading, which mandates licensing from the Hong Kong Monetary Authority for issuers of fiat-referenced stablecoins.

The Hong Kong government said in a statement that the Stablecoins Ordinance is set to come into effect this year, to “allow sufficient time for the industry to understand the requirements under the licensing regime.” The HKMA said it plans to hold additional consultations on the detailed regulatory framework.

Under the new regime, stablecoin issuers must meet requirements in key areas such as reserve asset management, redemption mechanisms, and client asset segregation. They are expected to maintain robust systems to stabilize token value and comply with anti-money laundering standards, counter-terrorist financing, risk management, and other regulatory requirements.

“The Ordinance adheres to the ‘same activity, same risks, same regulation’ principle, with a focus on a risk-based approach to promote a robust regulatory environment,” said Christopher Hui, the Secretary for Financial Services and the Treasury.

Johnny Ng, one of the lawmakers in the stablecoin bill committee, said on X that the passage of the stablecoin legislation is “just the first step in building Web3 infrastructure.”

“Issuing stablecoins is only the beginning; the most crucial step is to develop more real-world applications,” Ng said. “Whether in physical retail, cross-border trade, or peer-to-peer transactions, I believe there is tremendous untapped potential for stablecoin adoption.”

Hong Kong has rolled out the welcome mat for crypto firms by enacting a crypto licensing regime for crypto trading platforms in 2023. In March last year, the HKMA launched a sandbox for stablecoin issuers. It has admitted participants, including Standard Chartered Bank, Animoca Brands, Hong Kong Telecommunications, Jingdong Coinlink and RD InnoTech.

Hong Kong’s passage of the stablecoin licensing bill coincided with the U.S. Senate’s recent vote to advance its stablecoin legislation, dubbed the GENIUS Act. U.S. lawmakers are expected to vote on potential amendments before holding a final vote.

Sources: The Block