Racing to establish regulatory framework for stablecoins by August in Hong Kong
Hong Kong Introduces Comprehensive Stablecoin Legislation
Hong Kong has taken a significant step towards establishing itself as a global hub for digital assets with the launch of its Stablecoins Ordinance. The legislation, effective August 1, 2025, introduces a robust, pragmatic, and internationally aligned regulatory framework for stablecoin issuers and related service providers.
The Ordinance mandates mandatory licensing for all stablecoin issuers operating in or targeting the Hong Kong market. Applications are due by September 30, 2025, and compliance will be monitored by the Hong Kong Monetary Authority (HKMA).
Stablecoins in Hong Kong must be fully backed by fiat currency or liquid equivalents to ensure redemption rights for holders and maintain financial stability. This conservative stance on reserve asset management sets Hong Kong apart from other jurisdictions, where reserve requirements may vary or emphasize audits rather than full backing.
The Ordinance also mandates transparency, cybersecurity standards, and enhanced anti-money laundering (AML) and counter-terrorist financing (CTF) measures. These stringent controls are supported by detailed post-enactment guidelines released by the HKMA.
Licensed stablecoin issuers will undergo periodic checks and be listed on a public HKMA register, improving market transparency and investor protection. This approach to supervision is more transparent than in many other jurisdictions.
Hong Kong's approach balances innovation with risk management, aligning closely with international standards under the "same activity, same risk, same regulation" principle. The legislation allows for policy space supporting innovation without compromising on investor safeguards and systemic risk controls.
The first official licenses are expected in early 2026, and non-compliant entities must exit by November 2026. This firm but flexible regulatory timeline demonstrates Hong Kong's commitment to fostering a secure and transparent stablecoin ecosystem that facilitates cross-border payments and digital asset integration while ensuring financial system integrity.
The launch of the grant scheme for digital bond issuers in Hong Kong last year and Singapore's subsequent introduction of a similar scheme underscore Hong Kong's goal to attract stablecoin business. The HKMA has permissive details in the consultation such as the duration of securities used as part of the stablecoin's reserves being up to a year.
Usually, stablecoin reserves must match the currency of the stablecoin, but Hong Kong Dollar stablecoins are allowed to use US dollars due to the currency peg. The HKMA also has considerable latitude to approve other business activities of the stablecoin issuer.
According to Christopher Hui, Secretary for Financial Services and the Treasury, the commencement of the stablecoin law's operation will provide suitable guardrails for relevant stablecoin activities. This legislation illustrates Hong Kong’s flexible yet stable, investor- and system-protective stance compared to the global regulatory landscape.
The government of Hong Kong has introduced comprehensive stablecoin legislation effective August 1, 2025, requiring mandatory licensing for all stablecoin issuers operating in or targeting the Hong Kong market. This regulatory framework, aligned with international standards, also enforces transparency, cybersecurity standards, and enhanced anti-money laundering and counter-terrorist financing measures, providing insights into the stablecoin regulation in finance. The strict controls, detailed guidelines, and public listing of licensed stablecoin issuers are aimed at maintaining financial stability while fostering innovation in the digital assets sector.
