New stablecoin law to enhance Hong Kong's financial appeal to global issuers
The expected increase in market demand for stablecoins will encourage licensed institutions overseas to issue such cryptocurrencies in Hong Kong, boosting competitiveness, according to the city's financial chief as it prepares for its regulatory regime to take effect in August.
In his weekly blog on Sunday, Financial Secretary Paul Chan Mo-po said that the city market value of stablecoins globally was estimated at around US$240 billion (US$30.6 billion), with trading volume exceeding US$20 trillion last year.
'With the booming digital asset market, the market demand for stablecoins is expected to increase further,' Chan said. 'We have noticed that many market players are very interested in this.'
He said after the law comes into effect, the Hong Kong Monetary Authority would process the license applications received as soon as possible to enable qualified applicants to conduct their business, 'bringing new opportunities to Hong Kong's real economy and financial services'.
Hong Kong is among the first jurisdictions globally to introduce detailed regulations for the issuance of stablecoins, which are cryptocurrencies typically pegged to a reference asset, such as a fiat currency like the US dollar. The relevant ordinance is scheduled to take effect on August 1.
The new regulatory framework provides Hong Kong with one of the most
comprehensive legal frameworks for stablecoins and comes amid a worldwide push to regulate digital assets, which some fear could destabilise financial systems due to the ease with which they enable money to cross borders.
Coupled with the city's significant offshore yuan holdings and mainland China's restrictions on cryptocurrency use, the new law has raised hopes that the city could secure a prominent position in the stablecoin market, which is currently dominated by US dollar-backed tokens, such as Tether's USDT and Circle's USDC.
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