The Stablecoins Bill was passed on Wednesday by the Legislative Council to establish a licensing regime for fiat-referenced stablecoins (FRS) issuers in Hong Kong. The bill is expected to further strengthen Hong Kong’s regulatory framework on digital asset activities, fostering financial stability and encouraging innovation.

Remarking on the significance of the bill, Hong Kong Monetary Authority Chief Executive Eddie Yue Wai-man said: “We believe that a robust and fit-for-purpose regulatory environment would provide favorable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the broader digital asset ecosystem.”

The Stablecoins Ordinance is expected to come into effect later this year. It requires anyone issuing FRS in Hong Kong, or Hong Kong dollar-pegged FRS in or outside of the territory, to obtain a license from the HKMA.

Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said he hopes that the ordinance will be “in line with international regulatory requirements” and will lay a “solid foundation” for Hong Kong’s virtual asset market. It is believed that, with a vibrant and regulated virtual asset market, the city will strengthen its status of an international financial center.

While other jurisdictions hesitate, Hong Kong is leaning in — betting big on blockchain, decentralized finance and the metaverse. Hong Kong’s financial roots run deep, but its digital branches are reaching for something radically new. As the world debates the future of the internet, Hong Kong is building it. In Web3, trust is redefined. In Hong Kong, that definition is being written right now.

Hong Kong has the potential to play a key role in tokenization, thanks to its strong financial industry as well as its thriving fintech and Web3 industries.

Hong Kong ranked third in the Global Financial Centres Index (GFCI) report published a few weeks ago by Z/Yen of the United Kingdom and the China Development Institute of Shenzhen, retaining its place from the previous issue in September.

Despite geopolitical tensions, economic headwinds, and evolving regulatory landscapes, the Hong Kong Special Administrative Region continues to stand tall among financial powerhouses, as one of the world’s important financial centers that increases its position and importance year after year. Its strategic location, deep capital markets, and robust financial infrastructure make it a critical gateway between China and the rest of the world.

The latest GFCI ranking sends a clear message: The city remains an irreplaceable financial nexus in Asia and beyond. Hong Kong is not only a financial hub but also an innovation hub, as was demonstrated by the Global Innovation Index 2024, published on Sept 26 by the World Intellectual Property Organization, in which Hong Kong ranked 18th out of 133 economies.

The city’s legal system, a magnet for international investors, bolsters this narrative of growth and potential. Hong Kong’s adherence to the rule of law remains robust, outperforming many Western jurisdictions.

While the HKSAR profits from being the “gateway to China”, this role will admittedly diminish as the Chinese mainland opens its economy and financial system to outside players. Thus it would be wise for Hong Kong to diversify its economy as much as possible. It must therefore grab hold of any opportunity to do so. Web3 — and everything related to it — undoubtedly presents a great opportunity for the city.

Hong Kong is never satisfied with what it has and is always trying to enhance its status by becoming stronger in traditional areas as well as by embracing newer areas such as Web3 and — among many others — green finance.

Hong Kong has been pushing for a friendlier regulatory framework for digital assets, positioning the city as a virtual asset center, and stepping up efforts to make the HKSAR one of the world’s most important hubs for Web3, which is envisioned as a new, blockchain-based web. In this sense, the city is upgrading its superconnector role in various fields, including the digital yuan and ESG (environmental, social and governance) reporting.

Just as it once acted as a conduit for global finance into Asia, Hong Kong is now shaping up to be a gateway for Web3 capital, talent, and ideas. The city’s universities are beginning to offer blockchain-focused programs, and accelerator networks like Cyberport and the Hong Kong Science Park are onboarding dozens of early-stage Web3 startups with funding, mentorship, and access to enterprise clients.

This follows Hong Kong’s strong bet on fintech.

The HKSAR government will continue to promote the development of innovative financial services including central bank digital currencies and virtual asset transactions.

Hong Kong and the rest of the Guangdong-Hong Kong-Macao Greater Bay Area are certainly increasing their role as fintech hubs. The HKMA unveiled the Fintech 2025 blueprint in 2021 with the aim of encouraging the financial sector to adopt fintech comprehensively by 2025 to promote the provision of fair and efficient financial services for the benefit of Hong Kong residents and the city’s economy.

The blueprint also aims at pivoting the HKSAR toward a friendlier regulatory regime for digital assets, proving that the city is positioning itself to become a virtual asset center and crypto hub.

In addition, the Fintech 2025 strategy is aligned with the national 14th Five-Year Plan (2021-25) and the Long-Range Objectives through the Year 2035, which recognized Hong Kong’s economic potential at the national level.

In summary, the legal framework will provide the jurisdiction with the necessary regulatory tools to support the growth of virtual asset transactions. As such, the city is capitalizing on the rise of Web3 and green finance. Despite the volatile geopolitical situation, the city’s position as an offshore financial hub and its commitment to tokenization are strengthening, and it is on the right track to nurture a mature and sophisticated digital asset ecosystem.

The author is a fintech adviser, researcher, and former business analyst for a Hong Kong listed company.

The views do not necessarily reflect those of China Daily.