The Hong Kong government laid out proposals on Tuesday to regulate ride-hailing platforms, such as Uber (UBER.N), following years of talks and complaints from the city's licensed taxi drivers that they face unfair competition.
Uber in 2014 became the first ride-hailing platform in Hong Kong and has operated without formal regulation.
Police raided its office in 2015 and have arrested Uber drivers for operating without licences.
The city's taxi industry, which has been struggling with declining income, has said the lack of regulation gives ride-hailing services an unfair advantage.
In a paper submitted to the legislature, the Transport and Logistics Bureau said all platforms providing ride-hailing services must obtain a licence and comply with specific conditions.
Anyone who provides ride-hailing platform services without a valid licence may be subject to imprisonment and fines.
In a statement to Reuters, a spokesperson for Uber HK said the regulation was an "important milestone".
"We are encouraged to see safety and service standards - such as mandatory insurance, driver examinations, and regular vehicle inspections - placed at the centre of the proposed regime," the spokesperson said.
But the statement also said Uber was concerned about a proposed cap on the number of ride-sharing vehicles.
"Artificial limits risk increasing wait times, raising prices for riders, and restricting earning opportunities for drivers," it said, adding Uber looked forward to continued talks with the government and other stakeholders.
According to a survey carried out by Uber of more than 4,800 Hong Kong drivers, nearly 80% fear that strict quotas and high licensing fees could threaten their livelihoods.
The city's leader, John Lee, told a news conference on Tuesday there was a consensus in society that ride-hailing services must be regulated to protect the safety of passengers.
"I agree that the issue is complex, but I think the issue should not be delayed any further and the government must come up with a solution," Lee said.
He also said it was necessary to create an environment in which the ride-hailing services and traditional taxis can co-exist.
The Transport and Logistics Bureau said quota arrangements would be proposed in the first half of 2026.
Prior to that, the proposals allow for the legal amendments to be submitted to Hong Kong's Legislative Council for approval in the third quarter of this year.
Under the new law, anyone seeking a ride-hailing drivers' licence must be at least 21 years old, have held a private car licence for at least one year, have no serious traffic convictions in the last five years, and pass mandatory assessments and training.
