On May 5, the Hong Kong Legislative Council officially passed the Stablecoin Bill in its third reading, marking Hong Kong as the world's first jurisdiction to establish a comprehensive regulatory framework for fiat stablecoins. At the same time, on May 21, the U.S. Senate passed the GENIUS Act Stablecoin Bill by an overwhelming majority of 5 votes to 20.
After the implementation of the Hong Kong Stablecoin Ordinance, anyone who issues a fiat stablecoin in Hong Kong during the course of business, or issues a fiat stablecoin in Hong Kong or abroad that claims to be anchored to the value of the Hong Kong dollar, must apply for a license from the Monetary Authority. The regulations clearly stipulate that licensed institutions must comply with requirements such as capital reserves, redemption mechanisms, risk management, and anti-money laundering, and the minimum paid-up capital is set at HK$2500 million. The Monetary Authority has the right to temporarily suspend or revoke licenses and impose fines for violations by licensees, designated stablecoin entities, and their senior personnel.
Previously, in March 2024, the Hong Kong Monetary Authority established a "sandbox" system for stablecoin issuers, with participants including JD Coin Chain and Animoca Brands, to provide pilot opportunities for companies. However, with the official implementation of the Stablecoin Ordinance, these pilot companies still need to apply for licenses and undergo stricter regulatory review.
After the implementation of the regulations, a number of stablecoins such as FDUSD (First Digital) and TrueUSD will be included in the regulatory framework. Previously, Sun Yuchen's questioning of FDUSD reserves had triggered discussions in Hong Kong about the compliance of stablecoins. The Hong Kong Stablecoin Act clearly stipulates a series of mechanisms to ensure the perfect reserve of stablecoins: First, in terms of reserve asset management and stability, it is required that the market value of the reserve assets of stablecoins must be at least equal to their circulating face value at all times, and the license holder must have a robust stability mechanism, proper reserve asset separation management arrangements and sufficient disclosure policies; second, in terms of the redemption mechanism, it is stipulated that the license holder must pay the face value of the designated stablecoin to the holder who makes a valid redemption request, and no cumbersome conditions and unreasonable fees shall be attached, and the redemption procedures, time limits, relevant conditions, fees and rights must be clearly disclosed; third, the license holder must have an entity company in Hong Kong.
In addition to strict regulatory requirements, the framework also encourages the expansion of stablecoin applications in payment, cross-border transactions and retail. Councillor Wu Jiezhuang also said during the draft review that increasing the attractiveness of stablecoins and two-way circulation at the level of stablecoin issuance will help them have more market value. "I think legislation is just the most basic step and a beginning. The focus is on future application coverage, diversification of application scenarios, international recognition and even as a reserve, and the market situation of the global use of stablecoins. Stablecoin issuers can also invest relevant legal currency reserve assets in extremely low-risk projects, including sovereign bonds. These interests can be considered to be delivered directly to stablecoin holders in the future to increase their income." By promoting the implementation of stablecoins as "payment tools", the Hong Kong government strives to change the disorderly competition in the issuance of stablecoins, provide a standardized development platform for global financial technology and Web3 projects, thereby improving cross-border payment efficiency and promoting the entire digital asset market to develop in a more mature and orderly direction.
In terms of currency selection, although the current focus of the draft is on the regulation of Hong Kong's local stablecoins, the ordinance also reserves the possibility of incorporating other legal currencies (especially the RMB) into the regulatory framework. Qiu Dagen, a member of the Legislative Council of the Hong Kong Special Administrative Region, also spoke during the deliberation of the draft and said that in addition to the Hong Kong dollar and the US dollar, Hong Kong is also considering incorporating the RMB into legal stablecoins. Fang Hongjin, co-chairman of the Hong Kong Blockchain Association, said that the Hong Kong dollar itself maintains a linked exchange rate with the US dollar, and it is difficult to have an autonomous monetary policy, and then it is difficult to compete with the scale of other stablecoins under the existing system. Councillor Wu Jiezhuang spoke during the deliberation of the draft and said that the stablecoins legislated in this "Draft Ordinance" are based on legal currency assets. Promoting offshore RMB at the level of stablecoin compliance structure will contribute to the national strategy of RMB internationalization. By incorporating RMB stablecoins into the regulatory framework, it will help to obtain more potential capital inflows in the existing market.
Under the current international situation, the stablecoin development strategies of the East and the West have rarely come together. According to Deutsche Bank's analysis, at present, stablecoins backed by the US dollar dominate the market, with more than 99% of the stablecoin market value pegged to the US dollar and holding more than $1200 billion in US dollar-backed assets. The GENIUS Act recently passed by the US Senate is trying to consolidate its core position in the stablecoin market. The bill not only strictly regulates the issuance mechanism of US dollar stablecoins, but also strengthens the reserve asset requirements to ensure that all regulated stablecoins have sufficient US dollar-backed assets.
It is worth noting that the EU, as a pioneer in crypto compliance, is also actively deploying in the field of stablecoins. Since the MiCA Act came into effect at the end of 2024, the euro stablecoin market has begun to heat up. In November 2024, with the entry of issuers such as Circle, the monthly trading volume of euro stablecoins soared to nearly 11 million euros. But despite this, US dollar stablecoins still account for the vast majority of the circulation of stablecoins. However, as Hong Kong formulates new regulations and promotes the development of Hong Kong dollars and even offshore RMB stablecoins, potential RMB stablecoins in the future can become an important tool for international trade and cross-border payments, further weakening the monopoly of the US dollar in the stablecoin market, while also providing new opportunities for the internationalization of the RMB and the development of digital assets.