Hong Kong’s Legislative Council has officially passed the Stablecoin Ordinance, marking a significant milestone in the regulation of virtual assets. This new legal framework establishes a licensing regime for fiat-referenced stablecoin issuers, aiming to enhance financial stability while promoting innovation within the sector.
The ordinance is expected to take effect later this year, with a transition period allowing businesses to adapt to the new requirements. This move reflects Hong Kong’s commitment to becoming a leading hub for regulated digital assets.
Key Provisions of the Stablecoin Ordinance
The new regulatory framework introduces several critical requirements for stablecoin issuers:
- Licensing Requirement: Any entity issuing fiat-referenced stablecoins in Hong Kong, or issuing such stablecoins that reference the Hong Kong dollar outside the region, must obtain a license from the Hong Kong Monetary Authority (HKMA).
- Reserve Management: Issuers must comply with strict rules on reserve asset management, including proper segregation of customer funds and maintaining robust stabilization mechanisms.
- Redemption Assurance: Stablecoin holders must be able to redeem their assets at face value under reasonable conditions.
- Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF): Licensed issuers are required to implement comprehensive AML and CTF measures, along with risk management, auditing, and disclosure protocols.
- Retail Sales Restrictions: Only licensed issuers are permitted to sell fiat-referenced stablecoins to retail investors in Hong Kong.
Mr. Hui Ching-yu, Secretary for Financial Services and the Treasury, emphasized that the ordinance adopts a “same activity, same risk, same regulation” approach. This risk-based regulatory model aims to align with international standards while fostering sustainable growth in the virtual asset market.
Major Players in Hong Kong’s Stablecoin Ecosystem
The HKMA has already included several prominent institutions in its first sandbox list for stablecoin issuance. Among them, three major players have announced plans to form a joint venture dedicated to issuing a Hong Kong dollar-pegged stablecoin.
Joint Venture: Standard Chartered Hong Kong, Animoca Brands, and HKT
These three companies represent banking, Web3 innovation, and telecommunications, respectively. Their collaboration highlights the cross-sector interest in stablecoin development:
- Standard Chartered Hong Kong brings extensive experience in global markets and stablecoin partnerships, ensuring strong governance and banking infrastructure.
- Animoca Brands, a leader in Web3 and blockchain gaming, will focus on developing practical use cases and ecosystem applications.
- HKT will contribute its expertise in mobile wallet solutions to enhance both local and cross-border payment experiences.
Mr. Dominic Maffei, Digital Assets and FinTech Lead at Standard Chartered Hong Kong, confirmed that the consortium is accelerating its preparation efforts in light of the newly passed ordinance.
Other Key Participants
Two additional technology firms are also active in the sandbox:
- JD Technology HK (a subsidiary of JD.com) plans to leverage stablecoins to improve global supply chain and cross-border payment solutions.
- Rondeed Innovation Technology intends to issue HKDR, a Hong Kong dollar stablecoin, on the Ethereum blockchain. The company has already partnered with digital asset custodian Cobo, cross-border payment firm LianLian International, and virtual asset exchange HashKey.
According to Rondeed’s CEO Rita Liu, HKDR is not intended to compete directly with USD-pegged stablecoins like USDT. Instead, it aims to expand the overall utility and adoption of stablecoins across various sectors.
Global Context and Next Steps
The development of Hong Kong’s stablecoin market is part of a broader global trend. Regulatory frameworks are advancing in multiple jurisdictions:
- The European Union’s Markets in Crypto-Assets (MiCA) regulation came into full effect in late 2024.
- The United States Senate recently advanced the GENIUS Act, which proposes a federal regulatory framework for payment stablecoins.
The HKMA has also announced its intention to consult on regulations for over-the-counter virtual asset trading and custody services. A second policy statement on virtual asset development is expected in the near future.
Frequently Asked Questions
What is a stablecoin?
A stablecoin is a type of digital currency designed to maintain a stable value by referencing another asset, most often a fiat currency like the US dollar or Hong Kong dollar.
Who can issue stablecoins in Hong Kong?
Only entities licensed by the HKMA are permitted to issue fiat-referenced stablecoins. Unlicensed issuance is prohibited under the new ordinance.
Can retail investors buy stablecoins in Hong Kong?
Yes, but only stablecoins issued by licensed entities can be sold to retail investors. This measure is designed to enhance consumer protection.
What is the sandbox program?
The HKMA’s sandbox allows selected firms to test their stablecoin issuance models in a controlled environment before formally applying for a license.
How does Hong Kong’s approach compare to other regions?
Hong Kong’s regulatory framework is aligned with international standards like the EU’s MiCA regulation, emphasizing risk-based oversight and investor protection.
When will the new rules take effect?
The ordinance is expected to become law later in 2025, with a transition period to allow companies to comply with the new requirements.
The introduction of a clear regulatory framework is a positive step toward legitimizing and stabilizing the digital asset industry. For those interested in the technical and operational aspects of compliant stablecoin systems, you can 👉 explore advanced regulatory strategies. This development not reinforces Hong Kong’s position as an innovative financial hub but also provides a safer environment for users and investors.