Hong Kong is on the verge of launching its first regulated stablecoin ecosystem, marking a pivotal moment for the region’s digital finance ambitions. With the Stablecoin Bill passing its third reading in the Legislative Council on May 21, 2025, the city is positioning itself as a forward-thinking hub in the global stablecoin race—responding swiftly to international developments, including the U.S. Senate's accelerated efforts on its own stablecoin legislation.
Once signed by the Chief Executive and published in the Gazette, the new framework will formally come into effect, setting strict licensing and compliance requirements for any entity issuing fiat-backed stablecoins in or targeting Hong Kong. Industry experts anticipate that compliant Hong Kong-issued stablecoins could emerge by the end of 2025.
This article outlines the key milestones in the development of Hong Kong’s Stablecoin Ordinance Draft, explores its core regulatory components, and highlights what it means for financial innovation, investor protection, and the future of digital payments in Asia.
👉 Discover how regulated stablecoins are reshaping Asia’s financial future
Key Milestones in Hong Kong’s Stablecoin Regulation Journey
The path toward a robust stablecoin regulatory regime in Hong Kong has been both strategic and methodical. Over the past few years, policymakers have laid a solid foundation through consultation, sandbox testing, and phased implementation.
- January 12, 2022: The Hong Kong Monetary Authority (HKMA) released a discussion paper on crypto assets and stablecoins, initiating public dialogue on digital currency risks and opportunities.
- October 31, 2022: The Virtual Asset Development Declaration signaled Hong Kong’s commitment to becoming a leader in responsible digital asset innovation.
- January 31, 2023: HKMA published a summary of feedback from the initial consultation, shaping the direction of future regulation.
- June 2023: Launch of the virtual asset trading platform licensing regime, establishing oversight for exchanges.
- December 2023 – February 2024: Public consultation on regulating stablecoin issuers, drawing 108 formal responses from industry stakeholders.
- March 12, 2024: HKMA launched a stablecoin issuer sandbox, allowing selected firms to test compliance frameworks under supervision.
- July 17, 2024: Joint consultation summary released by the Financial Services and Treasury Bureau (FSTB) and HKMA.
- July 18, 2024: Sandbox participants announced—JD ChainTech (Hong Kong), Circle Innovation, Standard Chartered Bank (Hong Kong), Animoca Brands, and Hong Kong Telecom.
- December 3, 2024: The Chief Executive directed the submission of the Stablecoin Bill to the Legislative Council.
- December 6, 2024: The bill was officially gazetted.
- December 18, 2024: First reading in the Legislative Council.
- January 3, 2025: Considered by the House Committee.
- January 21, 2025: Reviewed by the Bills Committee.
- May 21, 2025: Passed second and third readings—marking legislative approval.
The law is now awaiting formal enactment through executive signature and gazettal.
Core Components of the Stablecoin Regulatory Framework
Regulatory Authority: The Financial Secretary & HKMA
The Financial Secretary, acting through the Hong Kong Monetary Authority (HKMA), will serve as the primary regulator. The HKMA holds broad supervisory powers to license, monitor, and enforce compliance across all regulated stablecoin activities.
What Qualifies as a “Specified Stablecoin”?
The ordinance focuses on fiat-backed stablecoins—those pegged to official currencies such as the USD or HKD. A "specified stablecoin" is defined as a digital token that:
- Claims to maintain a stable value by referencing one or more fiat currencies.
- Is issued with mechanisms ensuring redeemability at par value.
Notably, stablecoins referencing commodities or other assets may be added later via official announcement in the Gazette.
Regulated Activities: Who Needs a License?
Any person or entity engaging in the following activities must obtain a license from the HKMA:
- Issuing a specified stablecoin in Hong Kong.
- Actively promoting a stablecoin to the Hong Kong public.
- Issuing any stablecoin pegged in whole or in part to the Hong Kong dollar—even if issued offshore.
This extraterritorial reach ensures that foreign issuers cannot circumvent regulation by targeting Hong Kong users from abroad.
Licensing Requirements for Stablecoin Issuers
To receive and maintain a license, applicants must meet stringent criteria designed to ensure financial integrity and consumer protection:
(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 safe, liquid instruments (e.g., cash, short-term government bonds).
- Segregated from operational funds.
- Regularly audited and disclosed.
(b) Redemption Rights
Holders must be able to redeem their stablecoins for fiat at face value under clear terms. Conditions, fees, and processing timelines must be transparently disclosed—no hidden charges or unreasonable barriers allowed.
(c) Local Presence Requirement
Issuers must establish a registered legal entity in Hong Kong to facilitate supervision and enforcement.
(d) Minimum Capital
A minimum paid-up capital of HKD 25 million is required to ensure financial resilience.
(e) Fit-and-Proper Test
Key personnel—including controlling shareholders, CEOs, and directors—must pass a "fit and proper" assessment based on integrity, experience, and track record.
(f) Risk Management & AML Compliance
Issuers must implement comprehensive risk management systems tailored to their scale and complexity. This includes anti-money laundering (AML), counter-terrorism financing (CFT), cybersecurity protocols, and business continuity planning.
Who Can Sell Stablecoins to the Public?
Only authorized financial intermediaries may distribute specified stablecoins to retail investors:
- Licensed stablecoin issuers.
- Virtual asset trading platforms licensed by the Securities and Futures Commission (SFC).
- SFC-licensed corporations conducting Type 1 regulated activities (dealing in securities).
- Authorized institutions under the Banking Ordinance (i.e., licensed banks).
This layered approach ensures that only trusted, regulated entities handle public distribution—minimizing fraud and systemic risk.
Enforcement & Penalties for Noncompliance
The regulatory framework carries strong deterrents:
| Offense | Penalty |
|---|---|
| Operating without a license | Up to HKD 5 million fine and 7 years imprisonment |
| Unauthorized sale of stablecoins | Same as above |
| Fraudulent conduct related to stablecoins | Up to HKD 10 million fine and 10 years imprisonment |
| Misleading statements to induce purchases | Up to HKD 1 million fine and 7 years imprisonment |
Additionally, the HKMA can:
- Issue binding directives.
- Order investigations and evidence collection.
- Apply for search warrants.
- Impose fines up to HKD 10 million or three times the profit gained/loss avoided, whichever is higher.
- Suspend or revoke licenses.
Frequently Asked Questions (FAQ)
Q: When will the first regulated Hong Kong stablecoin launch?
A: Based on current timelines, compliant stablecoins are expected to emerge by late 2025, following final enactment and licensing approvals.
Q: Can foreign companies issue HKD-pegged stablecoins under this law?
A: Yes—but only if they incorporate a local entity in Hong Kong and meet all licensing requirements.
Q: Are algorithmic or crypto-collateralized stablecoins covered?
A: Not initially. The law currently targets fiat-backed tokens. Other models may be included in future amendments.
Q: How will reserves be verified?
A: Independent auditors must conduct regular attestations of reserve holdings, with results made publicly available.
Q: Will this boost Hong Kong’s fintech competitiveness?
A: Absolutely. By offering a clear, credible regulatory path, Hong Kong attracts global issuers seeking legitimacy and access to Asian markets.
Q: Is user data protected under this framework?
A: While not directly addressed in the bill, data privacy is governed separately under Hong Kong’s Personal Data (Privacy) Ordinance, which applies to all financial firms.
👉 See how compliant blockchain innovations are gaining momentum in Asia
The passage of Hong Kong’s Stablecoin Ordinance represents more than just regulatory progress—it’s a statement of intent. By combining rigorous oversight with innovation-friendly policies like the sandbox program, Hong Kong is crafting a model others may follow.
With major players like Standard Chartered and Animoca Brands already participating in pilot programs, the ecosystem is poised for rapid growth. As global demand for trusted digital money rises, Hong Kong’s regulated stablecoin framework could become a benchmark for financial stability in the Web3 era.