- New licensing regime requires fiat-referenced stablecoin issuers to obtain approval from the HKMA.
- The law supports financial innovation while ensuring investor protection and market stability.
What happened: Hong Kong has passed legislation requiring stablecoin issuers to be licensed, as part of a broader push to regulate virtual assets
The Legislative Council of the Hong Kong Special Administrative Region has passed the Stablecoins Bill, introducing a licensing framework for fiat-referenced stablecoin (FRS) issuers. Expected to take effect in 2025, the law mandates that any company issuing a stablecoin pegged to fiat currency—such as the Hong Kong dollar—must be licensed by the Hong Kong Monetary Authority (HKMA).
To qualify for a licence, applicants must meet strict criteria on asset backing, redemption mechanisms, and segregation of client funds. The bill applies to issuers operating within Hong Kong and to those marketing such stablecoins to Hong Kong residents. Christopher Hui, Secretary for Financial Services and the Treasury, said the law is grounded in the principle of “same activity, same risks, same regulation” to build a risk-based framework.
Eddie Yue, CEO of the HKMA, stated the regime aims to “support the healthy, responsible, and sustainable development” of digital assets.
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Why this is important
Hong Kong’s Stablecoins Ordinance marks a significant step in formalising the city’s approach to digital asset oversight. By enforcing licensing, the government aims to avoid the instability that has plagued unregulated stablecoin projects globally. This move contrasts with jurisdictions like the United States, where policy debates continue without clear consensus on crypto regulation.
The bill could enhance Hong Kong’s standing as a virtual asset hub in Asia, especially as competitors like Singapore have already rolled out robust digital finance frameworks. Companies looking to enter the Hong Kong market will need to invest in compliance, potentially raising the entry bar for smaller firms.
While this regulatory clarity may restrict rapid innovation, it addresses growing concerns around financial fraud, asset mismanagement, and systemic risk—issues highlighted by past collapses of stablecoins like TerraUSD. The ordinance could serve as a model for other jurisdictions seeking to balance innovation with protection.
