Stablecoin regulations in Hong Kong pose a complex challenge for the city's market expansion, according to financial experts.
Hong Kong is set to become a major player in the stablecoin sector, with a new regulatory framework that could encourage the participation of big financial firms. The new law, which sets stringent requirements for stablecoin issuers, is seen as a global standard and a means to minimize risk for major banks and large global crypto firms.
Under the new regulatory regime, potential stablecoin issuers must follow a rigorous application process. This process begins with a preliminary consultation with the Hong Kong Monetary Authority’s (HKMA) Licensing Division, where regulatory expectations and suitability are clarified. If the applicant’s parent company is regulated for digital assets or financial businesses in another jurisdiction, it must consult with its home regulator before proceeding.
After consultations, applicants complete and formally submit their license application to the HKMA by the key deadline of September 30, 2025, for the initial batch. The application will be reviewed and assessed by the Stablecoin Advisory Committee, which provides recommendations to the HKMA. Licensing decisions—approval or rejection—will follow, with the first licenses expected to be granted by the end of 2025.
Licensed stablecoin issuers must adhere to a series of stringent requirements. They must have robust anti-money laundering and counter-terrorist financing (AML/CFT) controls, risk management, and governance frameworks overseen by senior management, and sufficient financial resources, including a paid-up share capital of HK$25 million. Issuers must also have adequate reserve asset management, transparency regarding token issuance and redemption policies, and conduct stress testing to ensure the stability and soundness of their stablecoin arrangements.
The regime emphasizes the need for practical use cases and demonstrated capabilities and experience of the applicants, signaling a cautious, quality-over-quantity licensing approach by the HKMA. Licensees are primarily expected to focus on their licensed stablecoin business and need HKMA consent to engage in additional activities, ensuring risks and conflicts of interest are managed effectively.
The costs of entry and operations in Hong Kong’s stablecoin sector are too high for some applicants, which might initially sideline innovative start-ups. However, the new law encourages participation from big local and mainland financial firms. The Securities and Futures Commission (SFC) will oversee the stablecoin sector in Hong Kong, ensuring a prudent approach is taken in the implementation of the law.
The implementation of the stablecoin law in Hong Kong could potentially have an impact on the participation of smaller start-ups and fintech innovators in the cryptocurrency sector. Some may be deterred from participating due to the high costs and stringent requirements. However, the 'gold standard' licence in Hong Kong is seen as a means to minimize risk and signal trust by major banks and large global crypto firms, making it a potential draw for these entities.
In summary, potential issuers should engage early with HKMA, ensure full compliance with stringent governance, financial, and operational requirements, prepare substantive and credible use cases, and submit applications well before the September 2025 deadline to be favorably considered under Hong Kong’s steady and prudent regulatory approach to stablecoin issuance.
The new regulatory framework in Hong Kong may encourage large financial businesses and technology firms to enter the stablecoin sector, given the potential 'gold standard' license on offer. For applicants, the process involves a rigorous application, including consulting with the Hong Kong Monetary Authority’s (HKMA) Licensing Division, and adhering to stringent requirements such as robust anti-money laundering measures, adequate reserve asset management, and transparency in token issuance and redemption policies.
