The Hong Kong Monetary Authority (HKMA) has taken a significant step in the regulation of digital assets with the passage of the Stablecoin Ordinance by the Legislative Council in May 2025. This new legislation establishes a licensing regime for issuers of fiat-referenced stablecoins, further strengthening Hong Kong's regulatory framework for virtual asset activities. The primary goals are to safeguard monetary and financial stability while reinforcing Hong Kong's status as an international financial center. The ordinance is set to take effect on August 1, 2025, at which point the HKMA will begin accepting license applications. The authority is currently conducting market consultations on detailed implementation guidelines, aiming to finalize them promptly.
Global Developments in Stablecoin Regulation
As Hong Kong completes its legislative process, other jurisdictions are also advancing their regulatory frameworks. The European Union implemented its Markets in Crypto-Assets (MiCA) regulation in 2024, and the United States is actively discussing stablecoin-related legislation with encouraging progress. In early June 2025, a major stablecoin issuer completed a successful initial public offering in the U.S., with its stock price performing well post-listing. These developments have propelled "stablecoin" into mainstream discourse—spanning crypto communities, financial circles, and broader society. Media coverage now frequently explores basic educational content, diverse application scenarios, potential disruptions to traditional payment systems, and strategic implications.
As the regulator responsible for implementing Hong Kong's stablecoin regime, the HKMA welcomes public interest but also emphasizes the need for a balanced and objective perspective. While the benefits and use cases of stablecoins have been widely discussed during the legislative process and in recent media reports, it is equally important to address associated risks, regulatory approaches, and the criteria for licensing.
Understanding the Nature of Stablecoins
Stablecoins are not designed as investment or speculative instruments. Instead, they function as payment tools leveraging blockchain technology, with no inherent appreciation value. In contexts like cross-border payments, stablecoins represent just one of several emerging solutions. Others include Central Bank Digital Currency (CBDC) networks developed through collaborations between central banks, tokenized deposits planned by international banks, and cross-border linkages of fast payment systems. Each payment tool has distinct characteristics and varying levels of maturity, with market forces ultimately shaping their adoption and evolution.
As a payment instrument, stablecoins serve as a bridge between traditional finance and digital assets. Given their potential for widespread use, effectively managing inherent and spillover risks has become a priority for international regulators. The HKMA actively participates in global regulatory initiatives, including the implementation of the Global Regulatory Framework for Crypto-Asset Activities published by the Financial Stability Board (FSB) under the G20 in 2023. This framework provides international guidelines for stablecoin regulation, which have heavily influenced Hong Kong's approach.
The HKMA is currently leading an FSB review of how this framework is being adopted worldwide. Stablecoins, being relatively novel, combine attributes of traditional financial instruments with unique features such as anonymity and cross-border efficiency. These traits introduce challenges, particularly in anti-money laundering (AML) efforts. International cooperation in sharing regulatory practices and experiences is crucial for fostering a global environment conducive to the healthy and orderly development of stablecoins while mitigating financial risks.
Hong Kong's Licensing Regime for Stablecoin Issuers
As an international financial hub, Hong Kong is among the first jurisdictions to establish a comprehensive regulatory regime for stablecoin issuers. The Stablecoin Ordinance adheres to the principle of "same activity, same risk, same regulation," aligning with both international standards and local conditions. It addresses risks related to financial stability, money laundering, and investor protection while providing a foundation for secure and sustainable industry growth.
High Barriers to Entry
Considering the nascent nature of stablecoins, the risks associated with issuance, user protection requirements, and market capacity, the licensing regime sets a high bar. Initially, the HKMA anticipates issuing only a limited number of licenses. Successful applicants must demonstrate real-world application scenarios, operate in a稳健 and sustainable manner, and build market trust to ensure their stablecoins gain acceptance.
Compliance and Operational Requirements
From a compliance perspective, stablecoin issuers must possess robust capabilities and experience across multiple domains. These include:
- Reserve asset management and secure custody systems.
- Effective price stabilization mechanisms.
- Comprehensive and feasible redemption policies.
- Strong technological security, risk management, and AML controls.
If a stablecoin's application scenarios involve other jurisdictions, license applicants must present a holistic compliance plan with sufficient resources to ensure they and their business partners hold necessary licenses and adhere to relevant regulations in Hong Kong and abroad.
Business Sustainability and Market Development
The long-term viability of a stablecoin issuer depends on factors such as user base size, diversity of application scenarios, partnership networks, and interest rate environments. To promote responsible and sustainable market development, license applicants must provide concrete and viable business plans. They need to prove adequate technical and financial resources to support ongoing operations, ensuring resilience through market cycles.
Specifically, applicants should articulate how their stablecoin addresses genuine pain points in economic and financial activities. They must also explain strategies for maintaining sufficient usage volumes within regulatory boundaries and demonstrate resource adequacy to sustain operations during both favorable and adverse market conditions.
The Role of the Regulatory Sandbox
In early 2024, the HKMA launched the "Stablecoin Issuer Sandbox" to engage with institutions interested in issuing fiat-referenced stablecoins in Hong Kong. This initiative aims to clarify business models, communicate regulatory expectations, and provide guidance. However, participation in the sandbox is not a prerequisite for future license applications. Conversely, sandbox participants are not guaranteed licensure. The HKMA will evaluate all applications against consistent and stringent criteria.
Hong Kong is progressively building a regulatory framework that balances local needs with international standards and practices. This approach fosters healthy, responsible, and sustainable development of digital assets, further solidifying the city's role as a global financial center. As major jurisdictions advance their stablecoin regulations, Hong Kong remains committed to international collaboration in promoting financial stability and innovation.
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Frequently Asked Questions
What is a fiat-referenced stablecoin?
A fiat-referenced stablecoin is a type of digital asset designed to maintain a stable value by being pegged to a traditional fiat currency, such as the US dollar or Hong Kong dollar. It is primarily used for payments and transfers rather than investment purposes.
Why is Hong Kong introducing a licensing regime for stablecoin issuers?
The licensing regime aims to protect monetary and financial stability, mitigate risks like money laundering, ensure investor protection, and support Hong Kong's position as a leading international financial center by providing a clear regulatory framework for digital assets.
How can a company apply for a stablecoin issuer license in Hong Kong?
The HKMA will begin accepting applications from August 1, 2025, following the effective date of the Stablecoin Ordinance. Interested entities should prepare by ensuring strong compliance, risk management, and business sustainability plans, in line with the forthcoming guidance from the HKMA.
What are the key challenges in stablecoin regulation?
Key challenges include ensuring reserve transparency, preventing illicit activities like money laundering, managing cross-border regulatory differences, and maintaining price stability under varying market conditions.
How does Hong Kong's approach compare to other regions like the EU or the US?
Hong Kong's framework aligns closely with international standards set by bodies like the FSB. It shares similarities with the EU's MiCA regulation in emphasizing comprehensive oversight but is tailored to local market conditions and needs.
Can stablecoin issuers operate globally under a Hong Kong license?
Issuers must comply with regulations in every jurisdiction they operate in. A Hong Kong license does not automatically grant global operational rights; issuers need robust cross-border compliance plans and partnerships to navigate international regulatory requirements.