Hong Kong's (Stablecoin Bill) was submitted to the Legislative Council for its first reading today (18th) and the second reading debate began. Secretary for Financial Services and the Treasury Hui Ching-yu said that the purpose of the (Bill) is to establish supervision for issuers of fiat currency stablecoins. The system clearly stipulates that if you want to conduct regulated stablecoin activities, you must obtain a license.

Xu Zhengyu moved the second reading (Stablecoin Bill) at the Legislative Council meeting today. He pointed out that according to the proposed licensing system, anyone who conducts the following regulated stable currency activities under the (Bill) must obtain a license:

  1. Business of issuing fiat currency stablecoins in Hong Kong;

  2. Conducting business in issuing Hong Kong dollar stablecoins; or

  3. Actively promoting the issuance of its fiat currency stablecoins to the public in Hong Kong.

Xu Zhengyu mentioned that the regulatory system for stablecoin issuers mainly focuses on the following three key aspects:

  1. In terms of reserves, licensed persons must maintain a robust reserve stabilization mechanism, ensuring that the reserve assets for stablecoins consist of high-quality and highly liquid assets, with a total value at all times at least equal to the face value of the circulating fiat currency stablecoins, and properly segregated and safeguarded;

  2. To ensure proper protection for stablecoin holders, holders should have the right to redeem stablecoins from the issuer at face value, and redemption requests must be processed without unreasonable fees and within a reasonable time; and

  3. The regulatory system also stipulates a series of requirements for combating money laundering, risk management, disclosure regulations, auditing, and suitability of candidates.

He emphasized that the regulatory system also places great importance on protecting the public, and therefore has a series of other requirements. For example, only designated licensed institutions can sell fiat currency stablecoins in Hong Kong, including:

  • Licensed fiat currency stablecoin issuer by the Financial Management Commissioner;

  • Recognized institutions (i.e., banks);

  • Licensed by the Securities and Futures Commission to conduct Type 1 regulated activities;

  • and licensed virtual asset trading platforms.

Xu Zhengyu stated that the (bill) grants the Financial Management Commissioner a range of regulatory and investigative powers to effectively implement the system. In terms of regulation, the Financial Management Commissioner can establish regulations and issue guidelines; in terms of investigation, if the Financial Management Commissioner has reasonable grounds to believe that someone has committed an offense or violated regulations under this system, an investigation may be initiated, and relevant persons may be required to provide relevant evidence or assist in the investigation, including applying to a magistrate for a search warrant.

Xu Zhengyu finally urged the Legislative Council to support the prompt passage of the (bill) so that the stablecoin issuer regulatory system can be implemented in Hong Kong as soon as possible.

"The Hong Kong Financial Services and the Treasury Bureau moved for the second reading (of the Stablecoin Bill), hoping for swift passage to implement regulation". This article was first published in (BlockTech).