Hong Kong Prepares Stablecoin Licenses for Digital Finance

Source: CryptoTale Original Title: Hong Kong Prepares Stablecoin Licenses for Digital Finance Original Link: Hong Kong is moving closer to issuing stablecoin licenses as it deepens the integration of digital assets into its financial system. The shift signals a move beyond early crypto regulation toward building digital finance infrastructure. Officials now frame stablecoins as tools for payments, capital markets, and real-economy financing.

Finance Secretary Paul Chan outlined the approach while speaking at a global forum in Switzerland. He said Hong Kong focuses on smart regulation that balances innovation with user protection. The city applies a risk-based framework across financial activities. Under this model, similar risks face similar rules, regardless of technology.

Chan described the principle as “same activity, same risk, same regulation.” He explained that apps, traditional systems, and blockchains receive equal treatment if they pose comparable risks. This approach guides Hong Kong’s oversight of virtual assets. It also shapes upcoming stablecoin licensing rules.

Hong Kong already licenses virtual asset trading platforms under clear standards. Now, regulators are expanding toward stablecoins and tokenized financial products. Chan said the government works closely with the Hong Kong Monetary Authority on new trials.

Stablecoins Move Toward Core Financial Use

One key focus involves tokenized deposits. This process turns fiat money into digital tokens for faster transfers. Chan said tokenized deposits allow secure, near-instant transactions across networks. They reduce delays common in traditional settlement systems.

At the same time, Hong Kong plans to issue stablecoin licenses within months. Issuers of stablecoins are subject to stringent safety and transparency regulations. These rules aim to protect user funds and maintain financial stability.

Hong Kong has also advanced tokenized bond issuance. Since 2023, the city has sold three batches of tokenized green bonds. The issuances totaled about $2.1 billion. Investors use blockchain platforms to register and trade these bonds.

Officials say tokenized bonds combine sustainability goals with digital efficiency. The bonds support green projects while improving settlement speed. Authorities see this model as a blueprint for future capital market products. Tokenization now plays a growing role in public finance.

Tokenization Expands Across Markets

Hong Kong leaders believe tokenization can strengthen economic growth. Faster transfers reduce costs for businesses and investors. Digital assets also improve access to financial services. Smaller participants gain entry through lower barriers.

Tokenization gained momentum last year through private sector adoption. In October, a Hong Kong unit of a major Chinese bank tokenized a large money market fund. The fund held about $3.8 billion in assets. The bank issued digital tokens on a major blockchain network.

The tokens represented real financial value tied to the fund. Investors could trade them online while retaining ownership rights. This structure showed how traditional finance can move on-chain. Officials highlighted the project as a major milestone.

The initiative formed part of a broader framework called DART. DART stands for Digital Asset and Registered Token. It includes more than 40 initiatives planned over five years. The goal focuses on improving efficiency for businesses and consumers. The framework includes asset management, investments, and payments. It aligns private innovation with regulatory clarity.

Cross-Border Experiments Shape Strategy

Hong Kong also collaborates internationally on digital finance. In November 2022, a pilot linked Hong Kong with Brazil. A major Brazilian bank led the test with support from regulators and technology providers.

The project tested blockchain-based payments and trade finance. Participants included major blockchain infrastructure providers, Brazil’s central bank, and the Hong Kong Monetary Authority. The trial explored faster settlement for cross-border transactions.

Together, these steps mark a clear transition. Hong Kong now treats stablecoins as financial infrastructure. The city aims to integrate digital assets into everyday finance. Stablecoin licensing forms the next phase of that strategy.