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Hong Kong's Monetary Authority affirms regulatory framework for stablecoins, imposing stringent supervision

Hong Kong introduces licensing legislation for stablecoins, mandating all HKD-associated issuers to register and adhere to new regulations concerning reserves, risks, and advertising.

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Hong Kong's Monetary Authority finalizes stringent oversight regulations for stablecoin frameworks
Hong Kong's Monetary Authority finalizes stringent oversight regulations for stablecoin frameworks

Hong Kong's Monetary Authority affirms regulatory framework for stablecoins, imposing stringent supervision

Hong Kong Unveils Comprehensive Stablecoin Regulatory Framework

In a move to foster digital asset innovation while managing financial risks, Hong Kong has unveiled a new regulatory regime for stablecoin issuers, effective August 1, 2025. The regulations, outlined by Christopher Hui, Secretary for Financial Services and the Treasury, emphasise the government's commitment to consistent oversight.

The Stablecoins Bill, designed to provide a strong foundation for the continued development of the virtual asset industry in Hong Kong, sets forth a series of comprehensive requirements for licensed stablecoin issuers.

Eddie Yue, HKMA Chief Executive, has stated that the new regulatory regime is risk-based, pragmatic, and flexible. Key requirements include licensing, capital and reserve backing, risk and operational controls, AML/CFT compliance, and governance standards.

Any entity issuing a fiat-referenced stablecoin in Hong Kong, or a stablecoin referencing the Hong Kong dollar (HKD) even if issued overseas, must be licensed by the Hong Kong Monetary Authority (HKMA). Issuers must maintain a minimum paid-up share capital of HK$25 million to ensure sufficient financial resources to sustain their operations and obligations.

All issued stablecoins need to be fully backed by reserve assets, ensuring that the stablecoin value is stable and redeemable. Issuers must disclose reserve composition and manage the reserve assets prudently. Strict compliance with Anti-Money Laundering and Counter-Financing of Terrorism (AML/CFT) standards is mandatory.

Licensed stablecoin issuers must have robust risk management frameworks, including risk assessments, senior management oversight, and stress testing to ensure financial soundness. They must also disclose clear redemption policies and practices to the public, and segregate client assets from their own, maintaining clear records to protect user funds.

The licensing applies not only to issuers operating in Hong Kong but also to those marketing stablecoins referencing the HKD to Hong Kong residents, regardless of where they are located. Pre-existing stablecoin issuers operating before the regime's commencement may benefit from a six-month transitional period to comply with the new rules.

The HKMA provides detailed supervisory guidelines and AML/CFT guidelines to licensed stablecoin issuers, clarifying the regulatory expectations and licensing procedures. The first licenses under this regime are expected to be issued in early 2026.

In summary, the stablecoin regulatory framework in Hong Kong mandates licensing, strong capital and reserve backing, risk and operational controls, AML/CFT compliance, and governance standards to ensure the stability, transparency, and integrity of stablecoin issuance in the market. Future initiatives may include oversight for virtual asset over-the-counter (OTC) trading and custody services. The regulatory framework follows the principle of "same activity, same risks, same regulation".

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