Hong Kong Establishes Framework for Stablecoin Regulation

Introduction to the Stablecoins Ordinance

On August 1, 2025, Hong Kong implemented its Stablecoins Ordinance (Chapter 656) along with subsidiary legislation (Chapter 656A). This comprehensive framework establishes a licensing system managed predominantly by the Hong Kong Monetary Authority (HKMA) aimed at regulating stablecoin issuance within the region and, in select instances, beyond its borders.

Defining Stablecoins

The ordinance outlines what constitutes a stablecoin. According to section 3, a stablecoin is defined as a digital representation of value secured through cryptography. Unlike traditional currencies, these coins are not issued by a central authority but must serve as a medium of exchange, maintain a stable value, and be transferable electronically through distributed-ledger technology.

There is a specific category known as “specified stablecoin” that primarily seeks to maintain its value in relation to official currencies or other designated assets. The HKMA is empowered to determine which assets or measures will be recognized as reference points for these stablecoins. Consequently, this regulatory approach can encompass not only fiat-backed coins but also algorithmic or hybrid models.

Licensing Process and Reserve Requirements

Under Part 2, Division 1 of the ordinance, any entity wishing to issue a specified stablecoin in Hong Kong is required to obtain a license. This requirement extends to offshore issuers whose stablecoins reference the Hong Kong dollar, particularly when actively marketed to local users. The HKMA will conduct thorough assessments to ensure compliance with the prescribed financial and operational standards before issuing a license.

Each stablecoin issuer must maintain adequate financial resources, including liquid assets. Specifically, non-licensed institutions are required to have a minimum paid-up capital of HKD 25 million (approximately USD 3.1 million), or other approved financial resources. Issuers must establish a distinct reserve pool for each type of specified stablecoin. The market value of this reserve must meet or exceed the total par value of outstanding stablecoins, and these assets should be held in high-quality, liquid forms to minimize risk.

Redemption and Operational Controls

The ordinance stipulates the need for an effective structure allowing stablecoin holders to redeem their tokens at par. Any conditions attached to the redemption process must remain reasonable, ensuring requests are fulfilled within one business day unless alternative arrangements are sanctioned by the HKMA. In the case of insolvency, holders have rights against the reserves.

Moreover, issuers must implement robust fraud detection measures and adhere to anti-money laundering (AML) and counter-terrorism financing (CFT) regulations. They are prohibited from offering interest on stablecoins, and operational measures must include clear complaints procedures.

Advertising and Promotion Restrictions

The legal framework delineates how stablecoins may be offered to the public. Issuers must navigate specific restrictions on advertising and promotional activities, engaging only with permitted offerors licensed by HKMA, which includes various institutions such as registered virtual asset trading platforms.

While unlicensed issuers can promote their stablecoins under strict conditions, they must ensure that offerings remain compliant with the established regulations.

The Role of Designated Entities

The ordinance further categorizes designated stablecoin entities that impact offshore issuers of non-HKD referenced stablecoins. These entities must comply with requirements related to financial stability and operational governance. The HKMA holds disciplinary authority, allowing it to impose penalties for non-compliance that can reach significant monetary values or even lead to criminal charges for unlicensed activities.

Current Developments and Future Implications

As of April 2026, Hong Kong granted its first two stablecoin licenses, marking a transition to active oversight. Following this, measures were put in place to refine how relevant stablecoin activities are conducted by financial institutions, while maintaining rigorous standards for issuers.

The limited number of licenses granted thus far reflects a cautious and measured approach by the HKMA. Future developments in the stablecoin regulatory landscape will rely largely on the authority's response to subsequent applications and the broader adoption of licensed stablecoins within Hong Kong's financial ecosystem.