The Hong Kong Monetary Authority (HKMA) will implement a six-month transition period and establish special rules as part of its new stablecoin framework, which will take effect on Friday.
According to Hong Kong Radio on Wednesday, when the new stablecoin framework comes into effect, the HKMA will introduce a six-month transitional arrangement. The temporary rules also include issuing temporary licenses to issuers that can meet regulatory requirements.
However, if stablecoin issuers in Hong Kong fail to comply with the new rules within three months after they come into effect, they will be required to cease operations within four months. The HKMA believes that issuers unable to comply with the new rules will be forced to stop operations within one month of receiving notification, the report stated.
The HKMA indicated that it will issue the first batch of licenses in the future but emphasized that only a limited number of licenses will be issued initially. It also noted that the names of applicants will not be disclosed.
The framework imposes strict requirements on stablecoin issuers, including being fully backed by high-quality liquid reserves, processing redemptions within one business day, and maintaining a physical presence in Hong Kong. Issuers must also have sufficient financial resources.
Other requirements include customer due diligence procedures, wallet ownership verification, ongoing transaction monitoring, and blacklisting high-risk wallet addresses.
The HKMA will have the authority to investigate suspected non-compliance. Enforcement actions may include fines, public warnings, license suspensions or revocations, and referrals to law enforcement agencies.
The introduction of the new rules comes at a time when plans to criminalize unlicensed stablecoin promotion in the region are underway.
Interest in stablecoin issuance has increased ahead of the framework's launch. Reports indicate that Chinese e-commerce giant JD.com has registered entities related to a potential stablecoin launch just days before the Hong Kong stablecoin regulations take effect.
The company, often referred to as the Amazon of China, has registered two related entities through its subsidiaries and is also one of the participants in Hong Kong's stablecoin issuer sandbox program.
Similarly, it has been reported that Ant International plans to apply for stablecoin issuer licenses in Hong Kong and Singapore. Ant Group is part of China's Alibaba Group and owns Alipay, the world's largest digital payment platform, serving over 80 million merchants and 1.3 billion users.
In February of this year, Standard Chartered Bank Hong Kong, Animoca Brands, and Hong Kong Telecom announced a joint venture to issue a stablecoin backed by the Hong Kong dollar.
Related: On-chain Hong Kong, where are the opportunities?
Original: “Hong Kong to Launch a Six-Month New Stablecoin Regulatory Transition Period”
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