Hong Kong‘s proposed Stablecoins Bill has entered the Legislative Council, moving the region closer to establishing a comprehensive regulatory regime for stablecoins.

On December 6, the Hong Kong government published the bill in the special administrative region’s Gazette, taking it a step closer to becoming law. On December 18, the bill was forwarded to the Legislative Council of Hong Kong for its first reading.

Before the bill is signed into law, it must go through three readings, a process that includes debates, examinations, and potential amendments. Once 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 Bill

According to law firm King & Wood Mallesons, the Stablecoins Bill has three key components. These include licensing and requirements for stablecoin issuers, specific stablecoin offering and marketing restrictions, and broader consumer protections.

If the bill is enacted, stablecoin issuers in Hong Kong will need to obtain a license from the Hong Kong Monetary Authority (HKMA), the region’s central bank. Issuers must comply with comprehensive requirements to obtain a license.

The regulator will evaluate the issuer and its controllers, resources, stablecoins, reserve assets, and the mechanisms stabilizing its value. Only regulated entities and platforms will be allowed to offer stablecoins in Hong Kong or market them to the public.

The bill provides consumer protections affecting various market participants, including issuers and distributors.

MiCA-Compliant Stablecoins Dominate Europe

If the bill is enacted, Hong Kong may experience a transformation in stablecoin usage similar to the shift seen in Europe when the Markets in Crypto-Assets (MiCA) regulations came into force.

On December 18, research firm Kaiko and Netherlands-based crypto exchange Bitvavo reported that the introduction of MiCA led to a significant change in the stablecoin landscape in the region.

While issuers like Tether discontinued their Euro-backed stablecoins, compliant issuers thrived. By November, MiCA-compliant stablecoins captured the majority of the market, with Circle, Societe Generale, and Banking Circle’s stablecoins holding 91% of the market share by late 2024.

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