The licensing program that the Hong Kong Monetary Authority (HKMA) plans to launch for Hong Kong dollar (HKD)-based stablecoins in the country has not yet been implemented despite the anticipated March calendar. Although it was announced that the first license holders would be announced in March, no company has received this authorization yet. This development has raised questions about how quickly the regulatory framework will move from the policy phase to implementation.
HKMA’s stablecoin regulation target and expectations
Speaking at an event held in Hong Kong in February, Financial Secretary Paul Chan Mo-po stated that licenses would begin to be issued in March with the goal of a regular crypto finance ecosystem. Authorities emphasized that innovative usage areas, sustainable business model and strong regulatory compliance will be given importance in the licenses to be issued.
“When granting licenses, we ensure that applicants have unique areas of use, a reliable and sustainable business model, and strong regulatory compliance,” the opinion stated.
According to Hong Kong media reports in March, a venture between HSBC and Standard Chartered and Animoca was also expected to be among the first licensees. Official approval has not been given to these institutions yet.
Historical structure of the Hong Kong dollar and stablecoin regime
HSBC and Standard Chartered are known as the two major banks that have the right to print banknotes in Hong Kong. This status allows them to directly contribute to the physical circulation of the Hong Kong dollar and to ensure that the new stablecoin system is closely linked to the existing monetary infrastructure.
Hong Kong’s note-printing bank model dates back to 1846. At that time, in the absence of a central colonial bank, private banks issued banknotes using silver reserves as collateral. Nowadays, in this system, every bank that issues banknotes deposits US Dollars to the state’s Foreign Exchange Fund and obtains a debt document in return for this amount and prints banknotes. The fixed exchange rate is 7.80 Hong Kong Dollars per 1 US Dollar.
In a blog post he wrote in December 2023, HKMA President Eddie Yue, describing the origins of pre-1935 commercial bank notes, included them in the definition of “private money” and stated that stablecoins, which have a fixed value on the chain, are a modern, blockchain-based analogue of this practice.
In the statement made by HKMA, no information was given about the reason for the delay. The institution noted that work on the licensing process is actively continuing and new details will be shared in the future.
“The HKMA is actively pursuing the licensing issue and more information will be released in the future,” it said.
