Authorities in Hong Kong have introduced a new regulatory framework aimed at governing fiat-referenced stablecoins (FRS). The recently passed Stablecoins Bill mandates that any entity involved in issuing or offering these digital assets, whether within or outside the region, must secure authorization from the Monetary Authority. This regulation not only seeks to enhance financial stability but also ensures compliance with stringent anti-money laundering and counter-terrorist financing standards.

The ordinance requires entities engaged in stablecoin issuance to adhere to comprehensive regulations concerning risk management, transparency, auditing, and suitability. Furthermore, it stipulates that only designated licensed institutions are authorized to offer FRS within Hong Kong. Retail investors will only be able to access FRS issued by licensed providers, ensuring a safer investment environment. To mitigate fraudulent activities, advertising of FRS will be restricted to those endorsed by licensed issuers.

Under this new regime, all operations involving stablecoins must align with established guidelines designed to foster a secure and reliable ecosystem. Christopher Hui, Secretary for Financial Services and the Treasury, emphasized that the legislation adheres to the principle of "same activity, same risks, same regulation," focusing on a risk-based approach to create a robust regulatory atmosphere.

A transition period will be provided to assist industry participants in adapting to the new requirements and obtaining the necessary licenses. This measure aims to ensure a smooth implementation process while maintaining the integrity of the financial market.

With the ordinance anticipated to take effect later this year, Hong Kong is set to establish itself as a leader in regulating digital currencies, promoting trust and innovation in the fintech sector.