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New stablecoin framework in Hong Kong is officially launching, aiming to regulate the fast-growing stablecoin market.
Starting this Friday, the Hong Kong Monetary Authority (HKMA) will implement a six-month transition period for compliance. Temporary licenses will be issued to stablecoin issuers meeting regulatory criteria.
The new rules demand full backing of stablecoins with high-quality liquid assets. Issuers must also offer redemptions within one business day and maintain a physical presence in Hong Kong. These requirements are part of Hong Kong’s broader strategy to establish trust and transparency in crypto.
The HKMA warns that issuers who do not comply within three months must begin winding down operations within four months. Those deemed incapable of compliance may be shut down within a month. These tough guidelines indicate how serious Hong Kong is about stablecoin oversight.
Hong Kong tightens grip on stablecoins with new regulatory framework
The framework mandates Know Your Customer (KYC) processes and ongoing wallet monitoring. Wallet ownership must be verified, and risky wallet addresses blacklisted. HKMA will also enforce the regulations with tools like license suspension, fines, or referral to law enforcement.
This effort reflects growing concern globally about unregulated stablecoin operations. One major addition is criminal penalties for promoting unlicensed stablecoins. This move further aligns Hong Kong with global efforts to monitor digital assets effectively.
Interest in licenses has surged. JD.com, a Chinese e-commerce giant, registered two entities related to stablecoin issuance just before the new framework came into effect. The firm is already part of Hong Kong’s stablecoin sandbox initiative.
Ant International, a branch of Alibaba Group, is also preparing to apply for licenses in both Hong Kong and Singapore. Alipay, operated by Alibaba, serves over a billion users globally, making the group’s participation in stablecoin issuance significant.
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New stablecoin framework in Hong Kong attracts tech giants and banks
In February, Standard Chartered Bank Hong Kong, Animoca Brands, and Hong Kong Telecommunications formed a joint venture. Their goal is to issue a stablecoin backed by the Hong Kong dollar. This suggests traditional finance firms are eager to adopt regulated stablecoin solutions.
New stablecoin framework in Hong Kong may serve as a model for others seeking to regulate stablecoin activities without stifling innovation. The limited number of licenses and stringent requirements could raise the bar for what qualifies as a trustworthy issuer in the region.
Will Hong Kong set the global standard for stablecoin regulation?
