Key Takeaways
- Hong Kong passed its first dedicated stablecoin regulation in May 2025
- The ordinance introduces bank-level compliance requirements for issuers
- Minimum capital requirement set at HK$25 million for HKD-pegged stablecoins
- Establishes clear definitions and licensing framework for stablecoin activities
Overview of Hong Kong's Stablecoin Regulatory Framework
Hong Kong's Stablecoin Ordinance Draft represents a landmark development in digital asset regulation. Approved by the Legislative Council on May 21, 2025, and gazetted on May 30, this legislation positions Hong Kong as a pioneer in comprehensive stablecoin oversight.
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Historical Context
- 2021: HKMA released initial consultation paper on stablecoin regulation
- 2023: Draft ordinance published for public consultation
- 2024: Regulatory sandbox launched with首批3家参与机构 including Standard Chartered Bank (Hong Kong)
- 2025: Final approval and implementation
Core Provisions of the Ordinance
Definition of Stablecoins
The ordinance defines "specified stablecoins" as:
- Tokens pegged to one or more assets
- Maintaining stable value against HKMA-designated benchmarks
- Excludes traditional regulated financial products (bank deposits, securities, etc.)
Regulatory Scope
| Requirement | Description |
|---|---|
| Licensing | HKMA oversees licensing (fee: HK$113,020) |
| Jurisdiction | Covers HKD-pegged stablecoins issued overseas |
| Marketing | Regulates promotions targeting Hong Kong public |
Issuer Requirements
- Capital: Minimum HK$25 million reserve
- Asset Management: Segregated high-liquidity reserves
- Compliance: AML/CFT, financial audits, management vetting
- Transparency: Regular public disclosures and HKMA oversight
Significance of the Legislation
- Market Confidence: Provides legal certainty for stablecoin innovation
- Global Leadership: First comprehensive fiat stablecoin framework
- Financial Stability: Aligns with FSB recommendations for crypto oversight
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Frequently Asked Questions
What assets can stablecoins be pegged to?
The ordinance permits pegging to:
- Single fiat currencies (e.g., HKD, USD)
- Currency baskets
- High-quality liquid assets like government bonds
Can stablecoins pay interest?
No. The ordinance explicitly prohibits interest payments on specified stablecoins.
How does this affect retail investors?
Only licensed issuers may sell fiat stablecoins to retail investors, with strict advertising restrictions.
What's unique about Hong Kong's approach?
The framework combines:
- Bank-grade compliance standards
- Clear redemption requirements
- Proportional oversight for different risk levels
Stablecoin Applications and Innovations
Cross-Border Advantages
- Solves time zone/channel fragmentation in traditional finance
- Enables programmable payment flows
- Enhances settlement efficiency for multicurrency transactions
Emerging Use Cases
- Tokenized Bonds: Creating liquid secondary markets
- Smart Contracts: Automating financial processes
- Cross-Border Payments: Reducing FX friction