Hong Kong deliberates over regulations following the establishment of stablecoin law
Hong Kong Unveils Comprehensive Stablecoin Regulatory Framework
Hong Kong has taken a significant step forward in the digital currency space with the enactment of the Stablecoins Ordinance, effective August 1, 2025. The new legislation establishes a robust regulatory framework for fiat-referenced stablecoin issuers, overseen by the Hong Kong Monetary Authority (HKMA).
License Requirement
All stablecoin issuers conducting business in Hong Kong or issuing Hong Kong-dollar-linked stablecoins abroad must obtain a license from the HKMA. This requirement applies to both domestic and foreign issuers.
Reserve Requirements
Stablecoin issuers must maintain reserve assets that back the stablecoins, adhering to strict reserve asset management obligations. These reserves will ensure the stablecoin's stable value and support redemption rights for holders, emphasizing liquidity and security. The Ordinance allows bank deposits of up to 90-day maturity and marketable securities with a maturity of less than one year for the reserves.
Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT)
The HKMA has issued AML/CFT guidelines specific to licensed stablecoin issuers. These guidelines outline detailed compliance frameworks, including customer due diligence, transaction monitoring, and reporting suspicious transactions, aligning with international AML standards. The legislation requires additional due diligence on self-hosted wallets for AML compliance.
Capital Requirements
The Ordinance mandates capital adequacy to ensure issuers can meet their obligations, including operational risks, reserve shortfalls, and redemption demands. The HKMA’s consultations propose prudential capital frameworks proportional to the scale and risk profile of issuers. A minimum capital of HKD 25 million or an equivalent amount in another currency is required, with the regulator having the authority to specify a higher figure. This rule does not apply to banks.
Transition and Enforcement
There is a six-month transitional period starting August 1, 2025, allowing provisional licenses for issuers meeting compliance milestones. Non-compliant issuers must shut down operations within months following notices from the HKMA.
Other Key Provisions
- Stablecoin issuers are not permitted to pay interest to stablecoin holders, but marketing incentives are expressly allowed.
- Stablecoin holders can request direct redemptions, which should be processed within one working day.
- Regular attestations and audits are necessary for stablecoin issuers, with the frequency determined by the HKMA.
- US dollar assets are allowed for a HKD stablecoin.
- The allowable investments are issued by a government body, central bank, public body, or multilateral development bank. Overnight repo and money market funds that invest in the same assets are also acceptable. The HKMA gives itself the latitude to approve other types of assets.
- Daily publication of figures about issuance and reserves is required for stablecoin issuers, along with weekly reports to the regulator.
- While the backing assets for a stablecoin need to match the currency of the stablecoin, this rule is relaxed for the Hong Kong Dollar (HKD) given its peg to the US dollar.
The regulatory regime positions Hong Kong closely with international standards such as the EU’s Markets in Crypto-Assets Regulation and Basel Committee cryptoasset guidelines. The HKMA has emphasized a risk-based, pragmatic, and internationally aligned approach, and robust governance and risk controls for issuers.
- The Stablecoins Ordinance, effective August 1, 2025, establishes a regulatory framework for stablecoin issuers in Hong Kong overseen by the Hong Kong Monetary Authority (HKMA), setting international standards similar to the EU’s Markets in Crypto-Assets Regulation and Basel Committee guidelines.
- All stablecoin issuers doing business in Hong Kong or issuing Hong Kong-dollar-linked stablecoins abroad must obtain a license from the HKMA, following strict reserve asset management obligations that allow bank deposits of up to 90-day maturity and marketable securities with a maturity of less than one year for the reserves.
- The HKMA has issued Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) guidelines specific to licensed stablecoin issuers, outlining detailed compliance frameworks and requiring additional due diligence on self-hosted wallets for AML compliance.
- The new legislation mandates capital adequacy for stablecoin issuers, with the HKMA proposing prudential capital frameworks proportional to the scale and risk profile of issuers, and a minimum capital of HKD 25 million or an equivalent amount in another currency required, following regular attestations and audits.
