Hong Kong Version Stablecoin Issuance is Imminent: Compliance Issuance and Usage Guide

With the publication of the "stablecoin regulations" in the Hong Kong Gazette, the formal issuance of the Hong Kong version of stablecoin has entered the countdown stage. For investors and potential users interested in participating in this emerging market, two key questions deserve attention: how to become an issuer of the Hong Kong version of stablecoin, and how users can effectively utilize this new financial instrument.

The Path to Becoming a Hong Kong Version Stablecoin Issuer

Currently, the Hong Kong Monetary Authority has selected three institutions as potential issuers of the Hong Kong version of the stablecoin, namely an e-commerce related technology company, an innovative technology company, and a joint venture between a bank and a technology company. Since July 18, 2024, these institutions have been testing their stablecoin issuance plans in a "regulatory sandbox" environment. It is noteworthy that both issuing stablecoins in Hong Kong and issuing stablecoins pegged to the Hong Kong dollar overseas require the approval of the Hong Kong Monetary Authority.

Key Points of Application Requirements

1. Applicant: Must be a company registered in Hong Kong or an recognized foreign legal entity, and have a principal place of business in Hong Kong.

2. Personnel Qualifications: Management must possess appropriate professional knowledge and experience.

3. Capital Requirements: The minimum paid-up capital is 25 million HKD or equivalent currency, and sufficient high-quality, high-liquidity reserve assets must be held.

4. Asset Management: Reserve assets must be held in government-approved custodial institutions, strictly isolated from other assets.

5. Redemption Mechanism: The redemption mechanism must be made public, and there should be no restrictions on redemption or additional fees charged.

6. Risk Control: A comprehensive anti-money laundering and counter-terrorism financing compliance system must be established, as well as measures for the protection of user data security.

7. Information Disclosure: A white paper must be published, financial and reserve asset conditions must be disclosed regularly, and significant operational changes must be reported in a timely manner.

8. Audit Requirements: Subject to independent audits annually.

9. Compliance Obligations: Including timely payment of licensing fees, display of license numbers, maintenance of minimum standards, etc.

application procedure

To apply to become a Hong Kong version stablecoin issuer, two main steps must be followed:

1. Apply to join the "regulatory sandbox": The Monetary Authority will assess the applicant's willingness to issue, the feasibility of the plan, and regulatory Compliance.

2. Apply for a stablecoin issuance license: Submit detailed application materials in accordance with the above conditions.

The Monetary Authority may grant unconditional approval, conditional approval, or reject the application. The approved license will remain valid unless revoked.

Application Prospects of Hong Kong Version Stablecoins

Although the official specific exchange and usage plan has not yet been announced, from the information disclosed by some institutions participating in the test, we can glimpse the potential application scenarios of the Hong Kong version of the stablecoin:

1. Cross-border payment: Expected to achieve near-instant settlement, significantly reduce intermediary costs, and provide round-the-clock service.

2. Investment Trading: Possible collaboration with licensed virtual asset exchanges in Hong Kong to expand investment channels.

3. Retail Payments: Expected to be tested and applied in specific e-commerce platforms and other scenarios.

Differences in Regulation Between Mainland and Hong Kong

It is worth noting that there are significant differences in virtual currency regulation between Hong Kong and the mainland:

• Hong Kong is actively promoting the legislation and testing of stablecoins, and the courts have also protected relevant rights and interests through case law. For example, in certain cases, the courts have recognized the fiduciary duties of virtual asset platforms and have innovatively adopted measures such as tokenization injunctions to protect investors' rights.

• In contrast, the regulatory attitude towards virtual currencies in mainland China remains relatively strict. Virtual currencies are not regarded as legal tender, and related disputes are often difficult to receive support from the courts. However, criminal cases involving virtual currencies (such as theft and fraud) are usually still filed for processing.

With the launch of the Hong Kong version of stablecoin, this regulatory difference may bring new opportunities and challenges. Participants need to closely monitor policy trends and carefully assess risks.