Hong Kong: New Sandbox regime for stablecoins released by Hong Kong Monetary Authority

In brief

On 12 March 2024, the Hong Kong Monetary Authority (HKMA) issued a press release announcing the launch of its new stablecoin issuer sandbox arrangement ("Stablecoin Sandbox"). The Stablecoin Sandbox is another step following the legislative proposal to implement a new regulatory regime for stablecoin issuers.1 The Stablecoin Sandbox will facilitate communications between the HKMA and interested stablecoin issuers to gauge the expected regulatory standards. We discuss the Stablecoin Sandbox in more detail below.


What are the objectives of the Stablecoin Sandbox?

The Stablecoin Sandbox's aims include:

  • supporting development of the virtual asset ecosystem in Hong Kong;
  • communicating supervisory expectations and guidance on compliance to parties having genuine interest in, and reasonable plans to, issue fiat-referenced stablecoins in Hong Kong, with a view to facilitating subsequent implementation of the proposed regulatory regime for stablecoin issuers;
  • obtaining feedback to ensure the regulatory regime is fit-for-purpose when implemented; and
  • developing and promoting good practice in key control areas (e.g. reserves management and stabilisation, governance, user protection etc.).

Does Stablecoin Sandbox participation constitute licensing?

The HKMA has noted that successful admission to the Stablecoin Sandbox:

  • does not constitute endorsement by the HKMA as being qualified to be subject to the current or future regulation of the HKMA or other financial regulators in Hong Kong; and
  • does not replace the licensing process.

Stablecoin Sandbox participants will need to submit a separate licensing application in accordance with the requirements determined by the licensing authority once the regime is implemented.

What factors will be considered for Stablecoin Sandbox participation?

The HKMA will consider various factors in evaluating applications which include demonstrating the following:

  • genuine interest in, and a reasonable plan on, issuing fiat-referenced stablecoins in Hong Kong;
  • concrete plan on participating in the Stablecoin Sandbox; and
  • reasonable prospect of complying with the proposed regulatory requirements.

Will the Stablecoin Sandbox have any standardised requirements?

The HKMA may adjust the Stablecoin Sandbox requirements depending on the proposals and testing progress of the participants.

Can you publicly announce your Stablecoin Sandbox participation?

The HKMA may publicly announce information on participation in the Stablecoin Sandbox.

Prior to successful admission to the Stablecoin Sandbox, potential participants should not make any announcements in relation to their application status. After successful admission to the Stablecoin Sandbox, participants in the Stablecoin Sandbox should seek agreement from the HKMA prior to making any announcements.

What are the application procedures?

Interested parties should contact the HKMA via stablecoin_sandbox@hkma.gov.hk. The processing time will depend on factors such as the complexity of the proposed business model and the sufficiency and quality of information provided.

Going Forward

If you are interested in the Stablecoin Sandbox or stablecoins, please liaise with your usual contact at Baker McKenzie or the lawyers listed in this client alert.

1 Please refer to our earlier client alert for more detail on the consultation proposals.

Contact Information
Karen Man
Partner at BakerMcKenzie
Hong Kong
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Grace Fung
Partner at BakerMcKenzie
Hong Kong
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Aaron Dauber
Registered Foreign Lawyer / Knowledge Lawyer at BakerMcKenzie
Hong Kong
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Erin Cao
Registered Foreign Lawyer
Hong Kong
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