Hong Kong Passes Landmark Stablecoin Bill Amid Global Regulatory Focus

Hong Kong has passed a landmark Stablecoin Bill on May 21, 2025, establishing a comprehensive regulatory framework and licensing regime for issuers of fiat-referenced stablecoins (FRS) in the city.

This legislation requires any entity issuing stablecoins in Hong Kong, or those pegged to the Hong Kong dollar issued anywhere globally, to obtain a license from the Hong Kong Monetary Authority (HKMA), which now serves as the primary regulator for stablecoin issuers.

Key features of the Stablecoin Bill include:

• Mandatory licensing for stablecoin issuers to ensure regulatory oversight.

• Requirements for issuers to maintain high-quality, liquid reserve assets equal to the stablecoins in circulation, with proper segregation of client assets.

• Redemption guarantees allowing holders to redeem stablecoins at par value under reasonable conditions.

• Compliance with anti-money laundering (AML), counter-terrorist financing (CFT), risk management, disclosure, auditing, and fitness and propriety standards.

• Restrictions permitting only licensed stablecoins to be offered to retail investors and only licensed issuers to advertise stablecoins, enhancing consumer protection and reducing fraud risks.

Implications and significance:

The Bill aligns Hong Kong’s stablecoin regulation with international standards, aiming to safeguard monetary and financial stability while fostering innovation and sustainable growth in the virtual asset ecosystem.

It enhances investor and consumer confidence by providing clear regulatory clarity and safeguards, potentially encouraging broader market participation and innovation in digital payments and decentralized finance.

The legislation positions Hong Kong as a leading global hub for regulated digital assets and stablecoins, amid a growing global regulatory trend with regions like the US, EU, UAE, and Japan also advancing frameworks.

Financial institutions in Hong Kong, such as Standard Chartered, are preparing to develop Hong Kong dollar stablecoins, signaling strong industry support and readiness to leverage the new regulatory environment for innovative digital financial products.

Overall, the Stablecoin Bill represents a major step in Hong Kong’s strategic approach to virtual asset regulation, balancing risk management with technological innovation to cement its role in the evolving global crypto landscape. The ordinance is expected to take effect later in 2025, with transitional arrangements for industry adaptation.

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