Hong Kong enacts laws governing digital currencies with fixed value
Hong Kong has taken a significant step towards embracing the digital finance landscape by establishing a comprehensive regulatory regime for stablecoins, known as the Stablecoins Ordinance. The new framework, supervised by the Hong Kong Monetary Authority (HKMA), is set to come into force on August 1, 2025.
The Stablecoins Ordinance applies to any digital representation of value that maintains a stable value against a single asset or basket of assets and operates on distributed ledger technology. Any entity wishing to issue such stablecoins, whether based in Hong Kong or referencing the Hong Kong dollar, must obtain a license from the HKMA.
Key aspects of the regulatory framework include:
- Licensing Requirement: Issuers of fiat-referenced stablecoins must hold a license issued by the HKMA to operate legally.
- Scope: The licensing regime covers issuance, reserve management, and redemption activities related to stablecoins.
- Capital, Reserve, and Governance Standards: HKMA has set strict requirements on capital adequacy, reserve backing, governance structure, technology standards, and anti-money laundering controls for license applicants.
- Transition Provisions: Existing stablecoin issuers operating before August 1, 2025, will have specific transitional arrangements to comply with the new rules and obtain licensing within set timeframes.
- Regulatory Approach: HKMA is adopting a cautious and selective licensing approach, expecting to approve fewer than 10 licenses out of 40+ applications, focusing on operational readiness, compliance, and risk mitigation, particularly regarding money laundering.
- Regulatory Scope Expansion: HKMA can designate additional stablecoin-related activities as regulated after consultation with the Financial Secretary and publication in the official Gazette.
Notable entities participating in the HKMA's stablecoin sandbox include RD Innotech, backed by Zhong An Digital Asset Group and regulated crypto exchange HashKey, and JINGDONG Coinlink Technology, a subsidiary of China's e-commerce giant JD.com. Standard Chartered Bank Hong Kong, Hong Kong Telecom (HKT), and web3 firm Animoca Brands have also formed a joint venture to launch a stablecoin.
The HKMA's regulatory approach seeks to balance innovation in digital finance with the need to control risks. The policy objectives include strengthening financial stability, fostering innovation in digital finance, embedding stablecoins into next-generation financial infrastructure, and positioning Hong Kong as a global digital finance hub aligned with global standards like the US GENIUS Act and EU MiCA.
Extensive penalties will be imposed on unregulated entities that market stablecoins in Hong Kong. ZA Bank, affiliated with digital bank ZA Bank and a backer of startup RD Innotech, has welcomed the passage of the Stablecoin Bill and is positioning itself as a provider of reserve banking services.
The Stablecoins Ordinance is seen as a key pillar in Hong Kong's desire to maintain and enhance its position as an international financial center. As other jurisdictions, such as the United States, move towards stablecoin legislation, Hong Kong's comprehensive regulatory framework positions it as a leader in the digital finance landscape.
- In Hong Kong, any entity intending to issue stablecoins will have to secure a license from the Hong Kong Monetary Authority (HKMA) to operate legally under the Stablecoins Ordinance.
- The comprehensive regulatory regime supervised by the HKMA includes capital adequacy, reserve backing, governance structure, technology standards, anti-money laundering controls, and the licensing of issuance, reserve management, and redemption activities related to stablecoins.
- The HKMA's regulatory approach focuses on fostering innovation in digital finance while ensuring financial stability, and positions Hong Kong as a global digital finance hub aligned with global standards.
- The Stablecoins Ordinance imposes extensive penalties on unregulated entities that market stablecoins in Hong Kong, making it essential for operators to comply with the new regulations.
- Key players participating in the HKMA's stablecoin sandbox include RD Innotech, JINGDONG Coinlink Technology, Standard Chartered Bank Hong Kong, Hong Kong Telecom (HKT), and web3 firm Animoca Brands, who have collaborated to launch a stablecoin joint venture.
- ZA Bank, backed by digital bank ZA Bank, has welcomed the passage of the Stablecoin Bill and sees opportunities to provide reserve banking services, reflecting Hong Kong's ambition to maintain and enhance its position as an international financial center as other jurisdictions move towards stablecoin legislation.
