Hong Kong’s Stablecoin Licensing Unveiled

June 29, 2025 Regulations 0

Hong Kong’s Legislative Milestone in Digital Asset Regulation

On May 21, 2025, Hong Kong’s Legislative Council passed the Stablecoins Bill, marking a significant advancement in the region’s approach to digital asset regulation. This legislation introduces a comprehensive licensing regime for fiat-referenced stablecoin (FRS) issuers, underscoring Hong Kong’s commitment to fostering a secure and innovative financial environment.

Establishing a Robust Licensing Framework

The Stablecoins Ordinance mandates that any entity issuing an FRS in Hong Kong, or issuing an FRS that maintains a stable value with reference to the Hong Kong dollar, must obtain a license from the Hong Kong Monetary Authority (HKMA). This requirement applies regardless of whether the issuance occurs within or outside Hong Kong. The ordinance stipulates that licensees must meet specific criteria, including:

  • Incorporation and Financial Resources: Licensees must be companies or authorized institutions incorporated outside Hong Kong, with a minimum paid-up share capital of HK$25 million or an equivalent amount in another currency that is freely convertible into Hong Kong dollars.

Investor Identification, Introduction, and negotiation.

  • Reserve Asset Management: Each type of specified stablecoin issued must be fully backed by reserve assets, with the market value at all times equal to or exceeding the par value of the outstanding stablecoins in circulation. These assets must be segregated and protected from claims by other creditors.

  • Redemption Rights: Licensees are required to provide holders with the right to redeem their stablecoins at par value without undue restrictions or unreasonable fees. In the event of insolvency, holders are entitled to direct the disposal of the corresponding reserve assets pool to redeem all outstanding stablecoins on a pro-rata basis.

  • Risk Management and Compliance: Licensees must implement adequate risk management frameworks and internal controls addressing operational, financial, technological, and compliance risks. This includes policies for managing data safety, fraud detection, anti-money laundering, and counter-terrorist financing.

  • Governance and Disclosure: Issuers are required to publish clear and transparent information on each stablecoin issued, including a white paper. They must also disclose policies and procedures concerning conflicts of interest and appoint controllers and senior management personnel with prior consent from the HKMA.

Penalties for Non-Compliance

Operating without the requisite license is considered an offense under the ordinance, punishable by a fine of up to HK$5,000,000 and imprisonment for up to seven years. Additionally, an extra fine of up to HK$100,000 may be imposed for each day the offense continues. The ordinance also sets out offenses and penalties for unauthorized offering, advertising, inducement, fraud, or misrepresentation in stablecoin transactions.

Industry Response and Future Outlook

The enactment of the Stablecoins Ordinance has garnered significant attention from both local and international entities. Ant Group, an affiliate of Alibaba, announced plans to apply for a license to issue stablecoins in Hong Kong through its international arm, Ant International. This move aligns with Hong Kong’s strategy to enhance its competitiveness as a global hub for digital assets and develop its own stablecoin.

Financial Secretary Christopher Hui emphasized that the ordinance adheres to the ‘same activity, same risks, same regulation’ principle, focusing on a risk-based approach to promote a robust regulatory environment. He stated that this approach not only aligns with international regulatory requirements but also lays a solid foundation for Hong Kong’s virtual asset market, promoting sustainable industry development and protecting users’ rights and interests.

The Chief Executive of the HKMA, Eddie Yue, highlighted that the ordinance establishes a risk-based, pragmatic, and flexible regulatory regime. He expressed confidence that a robust and fit-for-purpose regulatory environment would provide favorable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the broader digital asset ecosystem.

The ordinance is expected to come into effect later this year, allowing sufficient time for the industry to understand the requirements under the licensing regime. The HKMA will conduct further consultations on the detailed regulatory requirements of the regime in due course.

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