Stablecoins under scrutiny as Hong Kong prepares to enforce legislation in August 2025
Hong Kong is set to establish itself as a global leader in digital finance with the introduction of a new regulatory framework for stablecoins, effective August 1, 2025. The comprehensive regime aims to foster innovation, financial stability, and investor protection in the digital asset ecosystem.
## Licensing Requirements
The new regulation introduces a licensing regime for stablecoin issuers, requiring only entities licensed by the Hong Kong Monetary Authority (HKMA) to offer stablecoins to retail investors. Unlicensed entities may only offer stablecoins to professional investors as defined under the Securities and Futures Ordinance.
The HKMA will assess applicants' suitability based on factors such as integrity, competency, financial soundness, and compliance history. The licensing requirement applies to both local and overseas entities issuing stablecoins referenced to the Hong Kong dollar. Stablecoin issuers must maintain a minimum base capital of approximately USD 3.2 million and back their stablecoins with high-quality, highly liquid assets.
A transitional period will help the industry adapt by facilitating license applications and business adjustments.
## Transparency and Supervision Measures
The HKMA will oversee the stablecoin market, ensuring issuers maintain fully-backed reserves and comply with capital and asset-quality requirements. Issuers must provide regular disclosures about their reserve holdings, operational status, and risk management practices, increasing transparency for investors and regulators.
An independent tribunal will review HKMA decisions related to licensing and enforcement, with its decisions being final except on points of law. The HKMA has also proposed stringent anti-money laundering and counter-terrorist financing guidelines for stablecoin issuers, aligning with international standards.
## Objectives for Financial Innovation and Sustainability
The regulation encourages the development and use of Hong Kong dollar-pegged stablecoins, reducing reliance on foreign, particularly USD-pegged, stablecoins and supporting the stability of the local financial system. The policy framework also emphasizes the tokenization of assets such as government bonds and precious metals, aiming to improve liquidity and broaden market access.
Through initiatives like the “LEAP” framework (Legal streamlining, Expanding tokenized products, Advancing use cases, and People and partnership development), Hong Kong seeks to create a more efficient and transparent environment for digital asset innovation. The government is also reviewing and drafting regulations to introduce tax incentives on profits from certain blockchain activities, further supporting financial innovation and sustainability.
These measures collectively aim to position Hong Kong as a global hub for digital assets while ensuring robust investor protection and financial stability. The new regulation opens the door to mass adoption of digital assets by institutional actors and the general public, consolidating Hong Kong's position as a regional and international center for crypto-finance.
- As a result of the new regulatory framework, only licensed entities by the Hong Kong Monetary Authority (HKMA) will be able to offer stablecoins to retail investors, while unlicensed entities can offer them only to professional investors.
- The new regulation introduces stringent anti-money laundering and counter-terrorist financing guidelines for stablecoin issuers, aiming to position Hong Kong as a global hub for digital assets while emphasizing financial innovation, sustainability, and investor protection.
