Hong Kong’s Legislative Council has passed a groundbreaking bill regulating stablecoins, clearing the way for a surge in digital asset development and Web3 innovation within the city. This legislation, which received final approval on May 21st, introduces licensing requirements for stablecoin issuers and mandates that all tokens are fully backed by fiat currency. Institutions can apply for licenses from the Hong Kong Monetary Authority by the end of this year, according to lawmaker Johnny Ng Kit-Chong. “With this framework in place, we anticipate major players to begin applying soon,” stated Ng on his X post (formerly Twitter), and he emphasized the city’s openness to collaborating with international firms seeking to issue stablecoins within Hong Kong. Ng, a vocal advocate for blockchain policy, has pledged to connect interested companies with regulators and local partners. The move aligns with Hong Kong’s ambition to establish itself as a leader in the Web3 space by offering clearer regulations for crypto businesses while mainland China pursues stricter controls on the sector. This legislation follows other regulatory updates within the digital finance sphere, including rules on crypto staking services, reflecting increased support for this infrastructure in the territory. Ng believes stablecoins have the potential to modernize payment systems, streamline cross-border transactions, and foster peer-to-peer payments. He also proposes allowing stablecoin holders to earn interest, which could enhance market stability and promote wider adoption of these assets. Data suggests that yield-bearing stablecoins have gained traction, jumping from $1.5 billion to $11 billion in circulation over the last few months, representing roughly 4.5% of the overall stablecoin market. The new law’s passage could position Hong Kong as one of the earliest major jurisdictions to implement a comprehensive licensing framework for stablecoins, while global regulators continue to catch up on this evolving landscape. Earlier in April, Hong Kong’s SFC introduced formal rules for cryptocurrency exchanges and funds offering staking services, providing clarity for digital asset platforms seeking to offer these features. The SFC also established a new framework for stablecoin issuance and staking, demanding prior written approval from exchanges before offering staking, requiring them to hold full custody of staked assets and ensure users are fully informed about associated risks and fees. Funds exceeding 10% in digital asset exposure will also be subject to the new regulations. These funds can participate in staking if it aligns with their investment objectives but must disclose relevant risks, obtain investor consent when needed, and avoid leveraged exposure.