Hong Kong’s proposed Stablecoins Bill enters the Legislative Council, moving the region closer to forming a comprehensive regulatory regime for stablecoins.
On Dec. 6, the Hong Kong government published the proposed bill in the special administrative region’s Gazette, taking it closer to becoming law. On Dec. 18, the bill was forwarded to the Legislative Council of Hong Kong for its first reading.
Before the bill gets signed into law, it has to go through three readings, which comprise a series of debates, examinations and potential amendments. When the bill passes the third reading, it will be forwarded to the region’s chief executive, who can sign it into law.
Key components of the Stablecoins Bill
According to law firm King & Wood Mallesons, the Stablecoins Bill has three key components. This includes a specified stablecoin issuer licensing and requirements, specified stablecoin offering and marketing restrictions and broader consumer protection.
When the bill is signed into law, issuers of stablecoins in Hong Kong will be mandated to obtain a license from the Hong Kong Monetary Authority (HKMA), the region’s central banking institution. The issuers must comply with the comprehensive requirements to obtain the license.
The regulator would evaluate the issuer and its controllers, resources, stablecoin, reserve assets, and the mechanism stabilizing its value. In addition, only regulated entities and platforms will be allowed to offer stablecoins in Hong Kong or market them to the public.
Furthermore, the proposed bill provides more protection for consumers affecting various market participants, including issuers and distributors.
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MiCA-compliant stablecoins dominate Europe
When the bill gets enacted, Hong Kong might witness a shift in stablecoin use in the region, similar to what happened in Europe when the Markets in Crypto-Assets (MiCA) regulations came into force.
On Dec. 18, research firm Kaiko and Netherlands-based crypto exchange Bitvavo reported that the introduction of MiCA significantly shifted the stablecoin landscape in the region.
While issuers like Tether discontinued its Euro-backed stablecoin, compliant issuers thrived. By November, MiCA-compliant stablecoins captured most of the market, with Circle, Societe Generale and Banking Circle’s stablecoins holding a 91% market share by late 2024.
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