Hong Kong’s new set of stablecoin regulations for issuers was put in place on Friday 1 August, with licences likely to follow early next year.
The regulations, issued by the Hong Kong Monetary Authority (HKMA), are designed to oversee stablecoin issuers, as well as the sales and marketing processes around the assets.
The Authority published two sets of guidelines on 29 July that outline the new regulatory environment.
New regulatory regime
The HKMA is encouraging parties interested in applying for a stablecoin issuer licence to get in touch by the end of August “so that the HKMA may communicate regulatory expectations and provide feedback as appropriate.” The deadline to apply for an early licence is the end of September.
Hong Kong is joining the crypto regulation race as the market develops, as well as following the trend of starting with stablecoins. They are an obvious early target both because they have real-world utility and they are pegged to fiat currencies, making them close to traditional financial products.
Singapore and UAE, for example, have crypto-friendly regulations already in place, and the US GENIUS Act provides the first regulatory framework governing stablecoins in that country. By providing clear rules for stablecoin issuers and operators, Hong Kong is aiming to keep up.
According to the HKMA’s criteria, regulatory compliance, use case analysis, business plans and financial sustainability will all be key factors for the issuance of a licence. Another prerequisite is the issuer holding HK$25 million (US$3.2 million) in capital, as well as strict adherence to risk management standards and anti-money laundering requirements.
Furthermore, the regulatory authority has established a public register of all licensed stablecoin issuers. The statement notes that “it is an offence under the Stablecoins Ordinance to falsely claim oneself as a licensee or an applicant.”
Dollar dominance
Currently, the global stablecoin market is valued at around $259 billion, according to data from CMC. Over 99% of that is based on the USD.
Beijing has been notably cool towards digital assets, with an official ban from the People’s Bank of China in 2021.
However, Hong Kong has been used as regulatory test-bed for Beijing and this would certainly not be the first time the Chinese government debuts a financial policy in the city before following suit with an adapted version for the mainland.
In 2024, for example, Stock Connect tested cross-border stock trading between China and Hong Kong as part of the development of a model for how China can gradually open its capital markets under controlled conditions.
There has been no official suggestion China will end its prohibition on cryptocurrencies, but nothing happens in Hong Kong without Beijing’s knowledge and tacit approval.
Chinese tech leading the charge
Around 50 companies are already planning on applying for stablecoin licences, Bloomberg has reported. JD.com and Ant Group, two of China’s largest tech companies which have recently been pushing for the creation of yuan-based stablecoins, are widely reported to be interested.
Darryl Chan Wai-man, deputy chief executive of HKMA, doesn’t expect wide-scale early stablecoin adoption in Hong Kong. “We aim to progress step by step, gradually driving the digital transformation of Hong Kong,” he told the South China Morning Post.
Not all the companies that apply for a licence will get one on the first try, but Wai-man noted that the first are expected to arrive “early next year.”
