The long-anticipated era of regulated stablecoins in Hong Kong is finally within reach. With the Legislative Council passing the Stablecoin Bill on May 21, 2025, Hong Kong has positioned itself as a forward-thinking financial hub in the global race for digital asset regulation — even outpacing the U.S. Senate’s ongoing efforts on its own stablecoin legislation.
Once signed by the Chief Executive and gazetted, the law will officially come into force, marking a transformative moment for fintech and digital finance in Asia. Under the new framework, any entity issuing fiat-backed stablecoins in Hong Kong — or pegging digital tokens to the Hong Kong dollar (HKD) regardless of jurisdiction — must obtain a license from the Hong Kong Monetary Authority (HKMA).
With enforcement expected before the end of 2025, the financial world is watching closely. This article explores the development timeline and core components of Hong Kong's landmark stablecoin legislation.
The Evolution of Hong Kong’s Stablecoin Regulation
Hong Kong’s journey toward stablecoin oversight has been deliberate, research-driven, and aligned with its broader vision to become a leading virtual asset hub. Below is a chronological overview of key milestones:
- January 12, 2022: The HKMA releases a discussion paper on crypto assets and stablecoins, initiating formal dialogue.
- October 31, 2022: The Hong Kong Virtual Assets Development Declaration affirms support for innovation in digital finance.
- January 31, 2023: The HKMA publishes a summary of public feedback from its initial consultation.
- June 2023: Licensing regime for virtual asset trading platforms goes live.
- December 2023 – February 2024: Public consultation on regulating stablecoin issuers launches; 108 responses received.
- March 12, 2024: The HKMA introduces a Stablecoin Issuer Sandbox to test real-world compliance models.
- July 17, 2024: The Financial Services and Treasury Bureau and HKMA jointly release consultation conclusions.
- July 18, 2024: First sandbox participants announced: JD ChainTech (Hong Kong), Oval Coins, Standard Chartered Bank (Hong Kong), Animoca Brands, and Hong Kong Telecom.
- December 3, 2024: The Chief Executive directs submission of the Stablecoin Bill to the Legislative Council.
- December 6, 2024: The bill is officially gazetted.
- December 18, 2024: First reading in the Legislative Council.
- January 3, 2025: Bill referred to the House Committee.
- January 21, 2025: Considered by the Bills Committee.
- May 21, 2025: Bill passes second and third readings.
- TBD: Chief Executive’s signature and gazettal — final step before enforcement.
This structured rollout reflects Hong Kong’s commitment to balancing innovation with investor protection and financial stability.
Core Components of the Stablecoin Regulatory Framework
Regulatory Authority: The Financial Secretary & HKMA
The Hong Kong Monetary Authority (HKMA) will serve as the primary regulator for stablecoin issuers. Empowered under the new law, it will oversee licensing, enforcement, and ongoing supervision.
What Qualifies as a “Specified Stablecoin”?
The regulation targets fiat-referenced stablecoins, specifically those claiming to maintain stable value by pegging to one or more official currencies (e.g., USD, EUR, or HKD).
Notably, any digital token pegged in whole or in part to the Hong Kong dollar, even if issued outside Hong Kong, falls under HKMA jurisdiction if marketed to the local public.
Stablecoins referencing commodities or other assets may be added later via official gazette announcements.
Regulated Activities: Who Needs a License?
Under the new rules:
- No person may issue or promote a specified stablecoin in Hong Kong without an HKMA license.
- Marketing a stablecoin to Hong Kong residents constitutes engaging in regulated activity.
- Offshore issuers targeting Hong Kong users are subject to regulation if their tokens are pegged to HKD.
Licensing Requirements for Stablecoin Issuers
To obtain a license, applicants must meet rigorous standards:
(a) Reserve Asset Management
Reserve assets must have a market value equal to or exceeding the total outstanding face value of issued tokens at all times. Reserves must be:
- Held in low-risk, highly liquid instruments (e.g., cash, government bonds).
- Segregated from operational funds.
- Regularly audited and disclosed.
(b) Redemption Rights
Holders must be able to redeem stablecoins at face value under clear terms. Redemption processes — including timelines, fees, and conditions — must be transparent and fair. No unreasonable barriers allowed.
(c) Local Presence
Issuers must establish a registered entity in Hong Kong to ensure regulatory accountability and enforcement capability.
(d) Financial Soundness
Minimum paid-up capital of HK$25 million required. Ongoing financial health must be maintained.
(e) Fit-and-Proper Criteria
Key personnel — including controllers, CEOs, and directors — must pass integrity and competence assessments. Operational teams must have proven expertise in blockchain, finance, and compliance.
(f) Risk Management & AML Compliance
Licensees must implement robust internal controls, cybersecurity measures, and anti-money laundering (AML) frameworks. Risk policies should scale with business complexity.
Open-Ended Licensing Model
Licenses are indefinite, remaining valid unless revoked by the HKMA. Continuous supervision ensures long-term compliance through audits, reporting, and on-site inspections.
Authorized Distribution Channels
Only regulated entities may offer specified stablecoins to the public:
- Licensed stablecoin issuers
- SFC-licensed virtual asset trading platforms
- SFC-licensed corporations conducting Type 1 regulated activities (dealing in securities)
- Authorized institutions under the Banking Ordinance (i.e., banks)
This multi-layered gatekeeping approach enhances market integrity.
Penalties for Noncompliance
The law imposes strict penalties:
- Unlicensed issuance or promotion: HK$5 million fine + 7 years imprisonment
- Unauthorized sale by unlicensed entities: Same penalty
- Fraud involving stablecoin transactions: HK$10 million fine + 10 years imprisonment
- Misleading statements to induce purchases: HK$1 million fine + 7 years imprisonment
Regulatory enforcement powers include investigations, document requests, directives, rule-making authority, and disciplinary actions — including temporary suspension or revocation of licenses.
Fines can reach up to HK$10 million or triple the profit gained/loss avoided, whichever is higher.
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Frequently Asked Questions (FAQ)
Q: When will Hong Kong’s stablecoin law take effect?
A: After passing its third reading on May 21, 2025, the bill awaits signature by the Chief Executive and publication in the Gazette. Full enforcement is expected by late 2025.
Q: Do offshore stablecoin issuers need a Hong Kong license?
A: Yes — if they issue a token pegged to the HKD or actively market it to Hong Kong residents.
Q: Can individuals hold or use regulated stablecoins freely?
A: Yes. The law regulates issuers and distributors, not end users. Consumers benefit from greater transparency and redemption guarantees.
Q: Are algorithmic or crypto-collateralized stablecoins covered?
A: Not initially. The current framework focuses only on fiat-backed tokens. Other types may be included in future amendments.
Q: How does this affect existing USDT or USDC usage in Hong Kong?
A: Tether and Circle may need to apply for licenses if they wish to formally promote HKD-pegged versions or expand local services under the new regime.
Q: What role does the sandbox play?
A: The HKMA sandbox allows selected firms to test compliance frameworks in real time before full licensing, accelerating safe innovation.
Final Thoughts
Hong Kong’s Stablecoin Bill represents a strategic leap toward becoming Asia’s premier digital finance gateway. By combining clear licensing standards, strong consumer protections, and a phased implementation approach — including real-world testing via its issuer sandbox — Hong Kong has crafted a model that other jurisdictions may soon emulate.
For innovators, investors, and institutions alike, this regulatory clarity opens doors to new use cases in payments, remittances, DeFi integrations, and cross-border commerce.
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As global regulators grapple with digital currency risks and opportunities, Hong Kong has sent a clear message: innovation thrives best under thoughtful oversight. The age of trusted stablecoins is no longer coming — it’s already here.