Stablecoin ordinance to drive industry growth: KPMG

Reminding stakeholders to balance optimism with risk protection and regulation obligation.

The new stablecoin ordinance regulating issuers, which will come into effect on 1 August, will enhance investors’ confidence in Hong Kong stablecoin market, but stakeholders should also pay attention to risk protection and regulation obligation, said Paul McSheaffrey, Senior Banking Partner of KPMG Hong Kong.

To strengthen the regulation of digital asset activities, the Legislative Council passed the stablecoin ordinance draft on 21 May.

The ordinance requires institutions issuing stablecoins or tokens pegged with Hong Kong Dollar or other fiat currencies in Hong Kong to obtain permission from the Hong Kong Monetary Authority (HKMA).

McSheaffrey believes this aligns Hong Kong’s stablecoin market with international standards, strengthening its position as an international financial center and cryptocurrency hub.

However, McSheaffrey reminds stablecoin issuers to be mindful of relevant risk management and anti-money laundering standards as they are under HKMA’s regulation.

Nevertheless, HKMA's involvement will expand market participation, with new entrants actively exploring while established players busy applying licenses under the new regime.

"We expect both tokenised deposits and the e-HKD initiative to continue to develop as they are important for Hong Kong's digital financial market," said McSheaffrey.

Global stablecoin market has exceeded US$250b, accounting for 7.48% of the total cryptocurrency market capitalisation,, with a compound annual growth rate exceeding 80% over the past five years.