On December 18, 2024, Hong Kong's Legislative Council saw the first reading of a new stablecoin bill, aiming to establish a robust regulatory framework for fiat-backed stablecoin issuers.
Objectives of the New Bill
During the presentation of the bill, Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, explained that the legislation aims to create a comprehensive legal structure for stablecoins. These digital assets have become a key part of the global financial system.
Risks and Opportunities of Stablecoins
With a market capitalization of $220 billion, stablecoins have emerged as less volatile alternatives in the cryptocurrency space. Tether leads the sector with $142 billion, followed by USDC at $42 billion. Hui highlighted the potential for stablecoins to become widely accepted payment mediums, warning of risks to financial stability if they remain unregulated.
Regulatory Measures and the Role of HKMA
This legislative move marks a significant step in Hong Kong’s regulatory approach to the growing stablecoin market. The HKMA is set to act as the primary regulator, licensing issuers, ensuring compliance, and investigating violations.
The bill's passage in the first reading marks a critical step towards regulating stablecoins in Hong Kong, reinforcing financial stability while supporting innovations in digital currencies.
