Stablecoin regulation in Hong Kong has officially entered uncharted territory. Thecity’sLegislative Council passed the Stablecoins Bill on 21 May 2025, creating what may beAsia’smost aggressive attempt yet to regulate the $170 billion stablecoin market.
Buthere’sthe thing: while Hong Kong positions itself as crypto-friendly, this new law imposes some of the strictest requirements globally for stablecoin issuers.The questionisn’twhether this framework will work—it’swhether it will actually attract the innovation Hong Kong claims towant,orsimplycreate another compliance hurdle that benefits only thebiggestplayers.
What are stablecoinsandwhy do they matter?
Stablecoins are cryptocurrencies designed to maintain stable value by being pegged to referenceassets, typically fiatcurrencieslike the US dollar or Hong Kong dollar.
Unlike volatile digital assets such as Bitcoin, stablecoins offer price stability – making them attractive for cross-borderpaymentsandremittances –andas a bridge between traditional finance and the cryptocurrency ecosystem.
The global stablecoin market has grown substantially, with industry observers noting their potential torevolutionise payment systems.“Stablecoins have the potential to shorten the time for cross-border payment from days to minutes,”said Teddy Liu, CEO of Jingdong Coinlink Technology, highlighting the efficiency gains these digital assets can provide.
Key provisions of HongKong’sstablecoin law
Licensing requirements
Under the new Hong Kong stablecoin regulation framework, any person conducting business involvingFRSissuance in Hong Kong must obtain a license from the Hong Kong Monetary Authority (HKMA).
This requirementextendsto stablecoins that maintain stable valuewith referenceto Hong Kong dollars, regardless ofwhere they are issued globally.
The legislation defines regulated activities broadly, covering not only direct issuance but also the offering of specified stablecoins and related advertising.Unauthorisedactivities in these areas constitute criminal offences under the new law.
Financial and operational standards
Licensed issuers must meet stringent criteria, including:
Minimum capital requirements: HK$25 million in paid-up share capital or equivalent financial resources
Reserve asset management: Maintaining high-quality, liquid reserves with minimal investment risks, segregated from other assets
Redemption guarantees: Processing stablecoinholders’redemption requests at par value without unreasonable conditions
Risk management systems: Implementing comprehensive controls for anti-money laundering, conflict management, and business continuity
Consumer protection measures
The lawprioritisesuser protection through several mechanisms. In cases of issuer insolvency, stablecoin holders gain direct rights to reserve assets for redemption purposes on a pro-rata basis.Additionally, only licensed institutionsmay offer FRS to retail investors, andonlyadvertisements for licensed FRS issuance are permitted.
Industry response and market implications
The passage of Hong Kong stablecoin regulation has generated significant interest from mainland Chinese institutions and companies.According tothe South China MorningPost’sreport, analysts at Citic Securities noted that the new framework could facilitate mainlandcompanies’real-world asset (RWA)tokenisationprojects in Hong Kong, with stablecoins serving asstabilisingtools to increase market liquidity.
“Hong Kong has entered a stage of accelerated growth oftokenisedRWAs,”wrote Ying Ying, an analyst at Chinese brokerage CSC Financial, indicating the broader implications beyond stablecoins themselves.
Several major companies have already positioned themselves tocapitaliseon the new regime.Jingdong Coinlink Technology, a subsidiary of e-commerce giant JD.com, participates in HongKong’sstablecoin sandbox program and plans to issue stablecoins pegged to both Hong Kong and USdollars, pendingBeijing’sapproval for offshore yuan-pegged versions.
Regional and global context
HongKong’scomprehensive approach to stablecoin regulation positions it ahead of many regional competitors.While jurisdictionslikeSingapore and Australia havereliedprimarily on existing legislation and soft law instruments, Hong Kong hascreateda dedicated regulatory framework.
The timing coincides with similar regulatory movements globally.The US Senate has advanced its stablecoin legislation, the Genius Act,focusingon these assets during the same period Hong Kong passed its bill.
Legal experts view HongKong’sinitiative as potentially influential beyond its borders. As noted inan analysisby Mayer Brown,“HongKong’sinitiative may serve as a benchmark for regional regulatory standards and inform compliance strategies for businesses moving forward.”
Challenges and criticisms
Despite the positive reception, the new Hong Kong stablecoin regulation framework faces some criticism. Legal analysts acknowledge that strict licensing requirements and compliance costs could burden smaller or emerging stablecoin issuers, potentially stifling innovation in the sector.
The comprehensive regulatory approach reflects lessons learned from past stablecoin failures, particularly the 2022 collapse of TerraUSD, whichrevealedvulnerabilities in stablecoin ecosystems and prompted calls for regulatory oversightglobally.
Implementation timeline and next steps
The Stablecoins Ordinanceis expectedto take effect later in 2025, providing the industry with time to understand and prepare for compliance requirements. The HKMA will conduct further consultations on detailed regulatory requirements, ensuring stakeholders can adapt their operations accordingly.
The legislation includes transitional arrangements to facilitate license applications and business adjustments. During the six-month non-contravention period, only advertisements for licensed FRS issuance willbe permitted,emphasisingthegovernment’scommitment to preventing fraud and protecting consumers.
Looking ahead: HongKong’sdigital assetecosystem
Government officials have outlined ambitious plans extending beyond stablecoins.Secretary for Financial Services and the Treasury Christopher Huiemphasisedthat the ordinance“lays a solid foundation for HongKong’svirtual asset market, which, in turn, promotes the sustainable development of the industry.”
Following the implementation of a virtual asset tradingplatformand stablecoinissuer regulatory regimes, the government plans to launch consultations on virtual asset over-the-counter and custodian services, along with a second policy statement on virtual asset development.
Hong Kong Monetary Authority Chief Executive Eddie Yuedescribedthe framework as“risk-based, pragmatic, and flexible,”designed to supportthe “healthy, responsible, and sustainable development of HongKong’sstablecoin and the broader digital asset ecosystem.”
While implementation challenges remain, the comprehensive framework positions Hong Kong as a serious contender in the global race to become a leading virtual asset hub. Thelegislation’ssuccess will likely depend on its practical implementation and theindustry’sability to adapt to new compliance requirements while maintaining the innovation that makes stablecoins attractive for cross-border payments and digital finance applications.
(Photo by Ruslan Bardash )
See also: Australia sets limits on crypto ATM use amid rising scam concerns
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