Hong Kong stablecoin rules set global benchmark as supply tops $250 billion

The global stablecoin market has surpassed $250 billion in total capitalisation, highlighting the increasing trust these fiat-pegged tokens have earned from both institutional players and retail investors. As this milestone signals a broader shift in digital asset credibility, Hong Kong has positioned itself at the regulatory forefront. On 21 May, the city passed a sweeping stablecoin law that introduces one of the world’s most comprehensive frameworks for the issuance and management of fiat-backed digital currencies. This legislation reflects Hong Kong’s ambition to become a global hub for regulated digital finance. Unlike broader crypto regulations that often remain vague, Hong Kong’s approach targets stablecoins with precision, mandating full asset backing, transparency, and strict operational standards for issuers. Hong Kong’s sandbox selects heavyweights for first batch of licences Hong Kong’s regulatory architecture not only outlines the rules for stablecoin operations but also defines who gets to participate. Several firms have already entered the Hong Kong Monetary Authority’s (HKMA) sandbox to trial their stablecoin offerings before full licences are granted. These include Jingdong Coinlink Technology, a JD.com subsidiary aiming to develop an international payments system, and a joint venture comprising Standard Chartered’s Hong Kong unit, Animoca Brands, and Hong Kong Telecommunications. Also selected is RD InnoTech, a local firm founded by former HKMA chief Norman Chan Tak-lam. In February, this consortium announced plans to apply for stablecoin licences. According to Vivien Wong, a partner at Hashkey Capital, more than a dozen other companies are currently in talks with authorities about potential launches, though the first batch is expected to be limited to the most financially robust applicants. Wong added that firms chosen initially are likely to be major conglomerates with strong local ecosystems, aligning with the government’s strategy for widespread, seamless adoption. New rules focus on asset reserves, transparency, and user protection Hong Kong’s stablecoin bill requires issuers to maintain full reserves using only high-quality, highly liquid assets such as short-term bank deposits or government bonds. The backing assets must be held in the same currency as the stablecoin, segregated from the issuer’s funds, and protected from creditor claims. Issuers are prohibited from offering interest on stablecoins, though other incentives may be allowed. Regular audits, prompt reporting of any inconsistencies, and enhanced disclosures are all compulsory, ensuring consistent regulatory oversight. The HKMA has indicated that these standards are aimed at limiting systemic risk while supporting the stablecoin market’s long-term growth. Local currencies could diversify a USD-dominated market CoinGecko data reveals that out of the global $250 billion stablecoin supply, $245.5 billion is backed by the US dollar. Tether’s USDT leads with a market cap exceeding $153 billion, followed by Circle’s USDC at around $60.9 billion. The dominance of USD-backed stablecoins underscores a critical opportunity for diversification. Hong Kong’s focus on launching a stablecoin backed by the local currency, the Hong Kong dollar, could shift this dynamic. Such a move would not only support the domestic economy but also provide businesses, particularly SMEs, with a regulated tool for efficient cross-border settlements. According to Wong, this could simplify trade and remittances across the Greater Bay Area, and potentially support a future RMB-pegged stablecoin for deeper integration with mainland China. The first stablecoins under Hong Kong’s new rules are expected to go live later this year. While initial offerings will likely be HKD-pegged, further iterations could include USD- and RMB-backed tokens, widening the city’s influence in international digital finance. Global implications as regulators look to Hong Kong While the US Congress debates the GENIUS Act to establish a federal stablecoin framework, Hong Kong’s legislation is already in place. Standard Chartered forecasts global stablecoin supply could reach $2 trillion by 2028, fuelled by regulatory clarity in the US and Asia. This projected growth has ramifications beyond crypto—it could increase global demand for US Treasuries and reinforce the dollar’s dominance in the digital economy. Hong Kong’s early move offers a live test case for global regulators. Authorities in Europe and other financial centres are closely monitoring how the city enforces its rules and integrates stablecoins into mainstream finance. Vivien Wong confirmed that major stablecoin issuers are assessing the Hong Kong framework as a potential model, underlining its role in shaping the next phase of digital asset regulation worldwide. The post Hong Kong stablecoin rules set global benchmark as supply tops $250 billion appeared first on Invezz

Source: Invezz