New Stablecoin Regulations Open a Fresh Era in Hong Kong’s Crypto Market

Hong Kong has reached a pivotal milestone in its cryptocurrency regulations with the approval of a new stablecoin law by the Legislative Council. This innovative legislation brings together traditional finance and cryptocurrencies within the same framework. Under the new law, only stablecoins backed 1:1 by legal currencies will be granted licenses. This licensing program is set to be fully operational by the end of the year.

Licensed Stablecoin Era Dawn in Hong Kong

The adoption of the Stablecoin Bill by the Hong Kong Legislative Council marks the beginning of a new chapter for the region’s cryptocurrency market . The law empowers the Hong Kong Monetary Authority (HKMA) to issue stablecoin licenses to financial institutions meeting specific criteria. The process is expected to initiate with application submissions towards the end of the year and become fully functional as the year concludes.

A fundamental requirement of the law is the exclusive permission of legally-backed stablecoins. This measure aims to ensure that cryptocurrencies launched in the market are transparent, reliable, and auditable. One of the main focuses of the legislation is consumer protection. It is anticipated that stablecoin projects will be developed in harmony with traditional banking principles due to this regulatory approach.

New Payment and Interest Opportunities with Stablecoins

Following the passing of the law, Hong Kong’s Web3 ambitions have resurfaced. Johnny Ng Kit-chong, a member of the Legislative Council, highlighted that this regulation is simply the beginning. He emphasized the need to expand the use cases for stablecoins, integrating them into everyday life. Ng suggested a roadmap to enhance stablecoin utilization, particularly in personal payments, cross-border trade, and peer-to-peer transfers.

Moreover, Ng’s proposals include a noteworthy aspect—the sharing of interest revenue generated through licensed stablecoins with users. This strategy aims to increase user loyalty and provide a competitive edge. Consequently, stablecoins could become appealing not only as a payment medium but also as an investment opportunity.

Meanwhile, the global stablecoin market continues its growth trajectory, with a total market cap approaching $250 billion and a daily transaction volume reaching $80 billion. According to CoinMarketCap data, the predominant stablecoin remains Tether (USDT), followed by USD Coin (USDC), Dai (DAI), Athana USDe (USDe), World Liberty Financial USD (USD1), and First Digital USD (FDUSD).

The implementation of these stablecoin regulations signifies a pivotal transformation for Hong Kong’s financial landscape. With an eye toward enhancing consumer protection and aligning with traditional finance principles, this regulation could set a benchmark for other jurisdictions. As the market expands, these measures may serve as a foundation for the future integration of cryptocurrencies into daily economic activities.