On May 21, 2024, the Hong Kong Legislative Council officially passed the "Stablecoin Issuer Ordinance Bill" in its third reading, setting a new benchmark for digital asset regulation in Hong Kong. Bitcoin continued its upward trend and reached a historic high. The bill provides the first complete regulatory framework for fiat-referenced stablecoins (FRS), balancing financial stability, risk control, and technological innovation.

As the first virtual asset trading platform in Hong Kong to be licensed by the Securities and Futures Commission, OSL Group expresses high concern and active support for this development. We believe that at this critical moment when the global traditional financial system is undergoing reshaping, this will have a profound impact on the development of the digital asset market and provide strong momentum for growth.

Core Points of Hong Kong's Stablecoin Regulatory Framework

The "Stablecoin Issuer Ordinance Bill" primarily targets fiat-pegged stablecoins (FRS). Its core content reflects the balance between innovation and risk management by the Hong Kong Monetary Authority (HKMA):

• 100% Reserve and Segregated Custody: Licensed issuers must maintain a robust stablecoin mechanism, ensuring that reserve assets consist of high-quality, highly liquid assets, and that they are always equal to the circulating fiat stablecoin denomination. These reserve assets must be properly separated and safeguarded from the issuer's own assets to ensure fund security.

• Unconditional Redemption Mechanism: Stablecoin holders have the right to redeem stablecoins from the issuer at face value. Redemption requests must be processed without any fees and within a reasonable timeframe.

• Strict Compliance Framework: Licensed issuers must comply with a series of stringent regulatory requirements, including anti-money laundering (AML), risk management, adequate disclosure of information, and qualified auditor selection, ensuring operational transparency and soundness.

• Trading on Licensed Platforms: Stablecoins must be traded on licensed virtual asset trading platforms to strictly ensure compliance with trading regulations and investor protection requirements.

Far-reaching Implications for the Digital Asset Industry

The passage of the "Stablecoin Ordinance Bill" is not only significant for Hong Kong but also sets a forward-looking institutional benchmark for the global digital asset industry. The ordinance enhances institutional transparency, boosts market confidence, and helps attract more traditional financial institutions into the Web3 space, promoting the deep integration of digital assets and traditional finance. At the same time, the ordinance will accelerate the practical application of stablecoins in cross-border payments, digital securities, and DeFi scenarios, unleashing greater potential. As one of the first jurisdictions in the world to establish stablecoin legislation, Hong Kong consolidates its position as an international financial center, strengthens its policy first-mover advantage, and gains more voice in the future digital financial system, seizing the strategic high ground of "digital minting rights."

OSL's Role in the Stablecoin Ecosystem

As a licensed virtual asset trading platform in Hong Kong, OSL plays a key role in the local stablecoin ecosystem construction. Leveraging its compliance qualifications and comprehensive infrastructure, OSL provides diversified services such as trading, brokerage, and custody, building the underlying support needed for stablecoin trading. Additionally, the platform actively promotes the tokenization of assets, covering stablecoins, structured products, and funds, helping institutional clients enhance capital efficiency. Furthermore, OSL explores the practical implementation of stablecoins in various application scenarios by establishing a cooperative network with issuers, custodians, and payment institutions, contributing to Hong Kong's creation of a complete and efficient stablecoin ecosystem.

Gary Tiu, Executive Director and Head of Regulatory Affairs at OSL Group:
"OSL Group actively participates in discussions on Hong Kong's stablecoin policy formulation, witnessing and promoting the formation of the stablecoin framework. The ordinance sets a unified standard for industry development, helping to enhance transparency and long-term stability."

Eugene Cheung, Chief Business Officer at OSL Group:
"Stablecoins are the bridge connecting global capital with on-chain efficiency. By achieving value anchoring through compliance, we are building a safer, controllable, and scalable digital financial system together with our clients."

Building a Responsible Market Ecosystem

OSL Group firmly believes that a regulated, transparent, and robust stablecoin system will become a key force connecting the Web3 ecosystem with the global financial system. To this end, we will continue to strengthen compliance construction, expand ecosystem cooperation, and provide reliable digital asset solutions for our clients. In the future, OSL will work hand in hand with regulatory agencies, market participants, and investors to jointly promote Hong Kong's position as a global leading digital asset center, building a responsible and sustainable market ecosystem.

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