[HKMA] Explanatory Note on Licensing of Stablecoin Issuers

While this Note summarises a number of principal provisions of the SO, the Guideline on Supervision of Licensed Stablecoin Issuers (“Supervisory Guideline”) and the Guideline on Anti-Money Laundering and CounterFinancing of Terrorism (For Licensed Stablecoin Issuers) (“AML/CFT Guideline”), this Note is not intended to be a comprehensive guide to the wide variety of compliance issues that may be relevant to a licensee. It is therefore not a substitute for appropriate legal and other professional advice in a given case. Prior to applying for a licence under the SO, parties are therefore advised to familiarise themselves not only with this Note but also with the SO, the Supervisory Guideline and the AML/CFT Guideline and seek legal and professional advice as appropriate.

1. Purpose & Scope

• Issued under the Stablecoins Ordinance (Cap. 656).
• The Monetary Authority (MA) is the licensing authority for stablecoin issuers in Hong Kong.
• Applies to anyone issuing or marketing fiat-referenced stablecoins in or into Hong Kong.

2. Licensing Requirement

• A licence is required to issue or market specified stablecoins unless exempted by the MA.
• Unlicensed activity is an offence.

3. Minimum Criteria for Licence

• Corporate structure: Applicant must be a Hong Kong-incorporated company (or subsidiary) unless already an authorized institution.
• Capital requirement: Minimum HKD 25 million paid-up capital.
• Reserve assets: Fully backed, segregated, high-quality, and held with qualified custodians; subject to audit and disclosure.
• Redemption: Holders must have the right to redeem at par within 1 business day.
• Governance: Senior management must be fit and proper, with relevant expertise, and largely based in Hong Kong.
• Risk management: Policies for credit, liquidity, technology, operational, and reputational risks.
• AML/CFT compliance: Full compliance with AMLO and MA guidelines.
• Disclosure: White paper, reserve attestation, redemption rules, risk disclosures.
• Other restrictions: No interest payments on stablecoins; must maintain orderly exit/recovery plans.

4. Application Process

• Pre-application consultation with MA is encouraged.
• Submission requires detailed documentation (corporate info, governance, compliance systems).
• Independent assessment reports may be required.
• Applications reviewed by the Stablecoin Advisory Committee.

5. Ongoing Obligations

• Annual licence fees, proper use of licence number in materials.
• Continuous compliance with minimum criteria.
• Mandatory reporting of insolvency, operational difficulties, or material changes.

6. Supervisory Powers & Enforcement

• MA may require information, appoint advisors, or install a statutory manager.
• Grounds for revocation/suspension include: failure to meet criteria, insolvency, misleading information, violation of licence conditions, failure to redeem, or risk to financial stability.
• Licences can also be revoked voluntarily, or suspended temporarily (up to 6 months).