Hong Kong’s Stablecoins Ordinance to Take Effect August 1: An Overview of the Regulatory Framework

On June 6, 2025, the government of Hong Kong published in the Gazette a notice to appoint August 1, 2025 as the effective date for the Stablecoins Ordinance (Cap. 656) following passage of the Stablecoins Bill on May 21, 2025. The Ordinance’s main purpose is to supervise activities involving stablecoins, initially supervise fiat-referenced stablecoins (FRS), and introduce a licensing regime for regulated stablecoin activities in Hong Kong.

This marks an important step forward in virtual asset regulation by the government of Hong Kong after the promulgation of the Policy Statement on the Development of Virtual Assets in Hong Kong in October 2022, following the launch of the licensing regime for virtual asset trading platforms in June 2023.[1]

After the Ordinance’s implementation, any person who issues FRS in Hong Kong or issues FRS pegged to Hong Kong dollars outside Hong Kong, unless exempted, must obtain a license from the Hong Kong Monetary Authority (HKMA). The Ordinance also restricts the offering of FRS in Hong Kong to designated licensed institutions, and only FRS issued by licensed issuers may be offered to Hong Kong retail investors.

In connection with this legislation, the HKMA is consulting on the Guideline on Supervision of Licensed Stablecoin Issuers (Draft Issuer Guideline) and the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers) (Draft AML Guideline and, together, the Guidelines). The consultation period will conclude on June 30, 2025. It is expected that the Guidelines will be issued by the HKMA on or before the commencement date of the Ordinance.

This article summarizes the key contents of the FRS issuer licensing regime (as established by the Ordinance and the proposed Guidelines) and the related stablecoin issuer sandbox and briefly comments on the impact of this legislation on Hong Kong’s Web3 industry.

BACKGROUND

Stablecoins, which purport to maintain stable value with reference to some real-world assets (RWA)—typically fiat currencies as in the case of FRS—have the potential to develop into a widely accepted means of payment and be incorporated into the mainstream financial system. Being the most basic form of tokenizing RWA (fiat currencies) itself, FRS is also a bridge to connect other RWA.

While stablecoins are mainly used in virtual asset trading, the Web3 industry has been exploring how stablecoins could be used as a medium of exchange in the real economy in, for example, payments, supply chain management, and capital markets. As a Web3 hub in Asia, Hong Kong including stablecoin issuance and distribution under its financial regulation is not just an opportunity but a necessity.

Following the principle of “same activity, same risk, same regulation” adopted by Hong Kong’s financial regulators in regulating virtual asset trading platforms and traditional financial activities, the Ordinance (together with the Guidelines once issued) aims to maintain financial stability and regulatory transparency while promoting financial innovation in Hong Kong.

LICENSING REGIME FOR STABLECOIN ISSUER

Covered Stablecoins

The new licensing regime focuses on FRS, by defining “specified stablecoin” subject to the Ordinance initially as a stablecoin that purports to maintain stable value with reference to one or more official currencies. By reference to the definition of “virtual asset” in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615) (AMLO), a “stablecoin” is defined as a cryptographically secured digital representation of value that

• is expressed as a unit of account or store of economic value;
• is used, or intended to be used, as a medium of exchange accepted by the public for payment for goods or services, discharge of a debt, and/or investment;
• can be transferred, stored, or traded electronically;
• is operated on a distributed ledger or similar information repository; and
• purports to maintain a stable value with reference to a single asset or a pool or basket of assets.

To avoid regulatory overlap, the definition excludes tokens already regulated in Hong Kong, including a limited purpose digital token (e.g., a customer loyalty or reward point, an in-game asset), a token constituting securities or a futures contract under the Securities and Futures Ordinance (Cap. 571) (SFO), a token constituting a float or a stored value facility deposit under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584), or a token constituting a deposit under the Banking Ordinance (Cap. 155) (BO). Central bank or government-issued tokens (i.e., central bank digital currencies) are also excluded.

While the regulatory focus is on FRS, to allow flexibility to respond to market developments, the Ordinance empowers the Monetary Authority[2] to specify, by notice published in the Gazette, stablecoins that reference other assets (e.g., commodity) as specified stablecoins.

Regulated Stablecoin Activities

Under the new licensing regime, unless otherwise exempted, no person may engage in a “regulated stablecoin activity” without a license. These activities include:

• Issuing a specified stablecoin in Hong Kong in the course of business; or
• Issuing a specified stablecoin in a place outside Hong Kong in the course of business, and the specified stablecoin purports to maintain a stable value with reference (whether wholly or partly) to Hong Kong dollars.

When determining whether a specified stablecoin is issued in Hong Kong, the HKMA will, depending on the facts and circumstances of each case, consider factors such as the FRS issuer’s place of incorporation, the location of its operations, provision of subsequent customer service to FRS users, and whether a Hong Kong bank account is used to process issuance and redemption requests.[3]

Pursuant to Clause 8 of the Ordinance, carrying on a regulated stablecoin activity or “holding the person out as” carrying on such an activity without a license or exemption is illegal. Pursuant to Clause 5 of the Ordinance, actively marketing, whether in Hong Kong or elsewhere, to the public of Hong Kong that the person carries on, or purports to carry on, an activity that would constitute a regulated stablecoin activity if carried on in Hong Kong is regarded as “holding out” as carrying on a regulated stablecoin activity, regardless of whether the active marketing is conducted by oneself or by others, and whether the activity is carried on or not. This effectively prohibits offshore issuers from actively marketing FRS to Hong Kong residents.

The HKMA will consider multiple factors in determining whether a person “actively markets” an issuance of FRS to the public of Hong Kong. Referencing a similar approach adopted by the Securities and Futures Commission (SFC) when determining “actively markets” under the SFO and the AMLO,[4] such factors would include, but not be limited to, the language used in the marketing messages, whether the message is targeted at a group of people that resides in Hong Kong, and whether a Hong Kong domain name is used for its website.[5]

Similarly, to allow regulatory flexibility, the Monetary Authority may, by notice published in the Gazette, specify an activity as a “regulated stablecoin activity.” In exercising such power, the Monetary Authority must consider factors such as the importance to the public interest, the importance to Hong Kong’s monetary or financial stability, and Hong Kong’s function as an international financial center.

Licensing Criteria

A licensee under the Ordinance must meet the minimum criteria as specified in Schedule 2 of the Ordinance unless a waiver or modification is granted by the Monetary Authority upon application by the applicant. Key elements of these minimum licensing criteria include:

Physical Presence in Hong Kong

The applicant must be a company incorporated in Hong Kong or an “authorized institution incorporated outside Hong Kong” (as defined in the BO). “Authorized institution” under the BO refers to a bank, a restricted license bank, or a deposit-taking company. As a principal place of business in Hong Kong is also required for the applicant, this means the authorized institution incorporated outside Hong Kong must register under the Companies Ordinance as a registered non–Hong Kong company—effectively the Hong Kong branch of a foreign bank.

Financial Resources

A licensee (that is not an authorized institution) must have sufficient financial resources including a minimum paid-up share capital of HK$25 million.

Management of Reserve Assets and Stabilization Mechanism

The market value of the specified reserve assets pool for the type of specified stablecoins must at all times be at least equal to the par value of the outstanding specified stablecoins of the type in circulation. A licensee must have robust stability mechanisms, proper segregation and management of reserve assets, and transparent disclosure policies.

• Segregation of Reserve Assets: Reserve assets may be held directly or by an arrangement with another person, and each specified reserve assets pool shall be segregated from any other pool of reserve assets maintained by the licensee, be adequately protected from claims by other creditors, and be segregated from other assets (including funds) of the licensee. As proposed in the Draft Issuer Guideline, effective trust arrangements should be put in place to ensure the segregation, including the appointment of an independent trustee or a declaration of trust over the reserve assets, and the custodian (which acts as the independent trustee) should be a licensed bank or other asset custodian under an arrangement that is acceptable to the HKMA.
• Currency of Reserve Assets: Each specified reserve assets pool must be held in the same reference assets unless prior written approval of the Monetary Authority is granted. As proposed in the Draft Issuer Guideline, as an exception, reserve assets of HKD-referenced specified stablecoins can be denominated in USD.
• Quality of Reserve Assets: The reserve assets of a licensee must be of high quality and high liquidity with minimal investment risk. As proposed in the Draft Issuer Guideline, these include, e.g., bank deposits with a term of no longer than three months, marketable debt securities issued or guaranteed by a government or central bank having residual maturity of no longer than one year, cash receivable from overnight reverse repurchase agreements, investment funds that invest in the foregoing assets, subject to certain conditions.
• Attestation, Audit and Disclosure: As proposed in the Draft Issuer Guideline, a licensee should prepare statements on the par value of the outstanding specified stablecoins in circulation and the market value and composition of its reserve assets daily, report such information to the HKMA weekly, and update it at a reasonably prominent location on its website. The licensee should engage a qualified and independent auditor to (1) regularly attest, at a frequency acceptable to the HKMA, whether its reserve assets are adequate to fully back the par value of the outstanding specified stablecoins in circulation as of the last business day of the report period, and as of at least one randomly selected business day during such period, and (2) conduct regular financial audits on its reserve assets. The attestation reports and audit reports should be submitted to the HKMA in a timely manner. The attestation reports should be disclosed to the public at a reasonably prominent location on its website.

Redemption

A licensee must provide each stablecoin holder a right to redeem the specified stablecoin at par value in the reference asset to which the specified stablecoin is referenced, after deducting any fee that should be reasonable, without attaching any unduly burdensome conditions. Redemption rights, including fee, condition, processing time, mechanisms and procedures for redemption, must be adequately and timely disclosed to the public. As proposed in the Draft Issuer Guideline, unless otherwise approved by the HKMA, valid redemption requests should be processed within one business day after the day on which it is received by the licensee.

Fit and Proper Persons; Localization

Controllers, chief executives, alternate chief executives, stablecoin managers, and directors of a licensee must be fit and proper and approved by the Monetary Authority. Each of the officers of a licensee who is responsible for the day-to-day management and operation of its licensed stablecoin activities must have the appropriate knowledge and experience to discharge the officer’s responsibilities effectively. The chief executive, alternate chief executive, and stablecoin manager must reside in Hong Kong.

Prudential and Risk Management

A licensee must have appropriate risk management policies and controls proportional to its business scale and complexity, including anti-money laundering and counter-terrorist financing (AML/CFT) controls. As a stablecoin issuer will undertake activities that result in it acting as an intermediary and therefore will be included in the definition of “financial institution” in the AMLO, as proposed in the Draft AML Guideline, the design and implementation of AML/CFT policies, procedures, and controls should follow a risk-based approach, covering the minimum aspects required in the guideline. Notably, a licensee should conduct customer due diligence measures on its customers, including a person who has a business relationship with the licensee and a person who conducts an occasional transaction involving an amount equal to or more than HK$8,000 with the licensee.

Disclosures

A licensee must publish a white paper to provide comprehensive and transparent information about the type of specified stablecoins to be issued. Other disclosure requirements include complaint handling procedures and conflicts of interest.

Business Activity

A licensee (that is not an authorized institution) must obtain the Monetary Authority’s consent before it carries on any business activity other than a licensed stablecoin activity.

Open-Ended License

A license granted to a licensee under the Ordinance is an open-ended license, that is, as long as the licensee has not been revoked by the Monetary Authority it will continue to be valid. A licensee will be subject to continuous supervision by the Monetary Authority.

A license granted to a licensee under the Ordinance can be unconditional or conditional. The Monetary Authority can add, cancel, or modify the attached conditions after issuing the license.

Becoming a Controller of a Licensee

As mentioned above, a controller of a licensee must be a fit and proper person, and consent of the Monetary Authority must be obtained before such person becomes a controller of a licensee. A “controller,” in relation to a licensee, is defined as:

• A person who, either alone or jointly with an associate,[6] is entitled to exercise or control the exercise of at least 10% but not more than 50% of the voting rights at general meetings of the licensee or its holding company (a minority shareholder controller);
• A person who, either alone or jointly with an associate, is entitled to exercise or control the exercise of more than 50% of the voting rights at general meetings of the licensee or its holding company (a majority shareholder controller); or
• A person in accordance with whose directions or instructions the directors or a majority of the directors of the licensee or its holding company are accustomed to act (an indirect controller).

Generally, the Monetary Authority should decide whether an applicant can become a controller of a licensee within three months, and such period can be extended if additional information is required or a preliminary notice is issued. The Monetary Authority may impose conditions in its consent to protect the interests of stablecoin holders, but only after issuing a preliminary notice and considering any representations made by the applicant. The applicant should become a controller within a validity period of 12 months from the date on which the Monetary Authority issues the consent notice.

The Ordinance defines “specified shares” as shares of a licensee (or its holding company) that a person and their associates did not hold before becoming a “specified controller” (i.e., a minority controller or a majority controller). The Monetary Authority has the power to impose restrictions on specified shares acquired without consent of the Monetary Authority, such as invalidating their transfer, suspending voting rights, and prohibiting further issuance of specified shares based on the rights to acquire specified shares. If specified shares are restricted, an agreement to transfer those shares or rights thereto is void. In addition, the Court of First Instance may order the sale of those specified shares to which restrictions have been imposed.

Designated Stablecoin Entities

Similar to the definition of regulated stablecoin activity, the Ordinance also gives the Monetary Authority the power to designate, through notice published in the Gazette, (1) stablecoin issuers that do not need to apply for a license (i.e., businesses that issue specified stablecoins outside Hong Kong and such business is not prohibited by Clause 8 of the Ordinance) and (2) entities that provide services to a stablecoin payment system as “designated stablecoin entities.” A “stablecoin payment system” means a system or arrangement that comprises a set of instruments, procedures, and rules for the transfer of specified stablecoins, or for the clearing or settlement of payment obligations using specified stablecoins.

Similarly, in exercising the power, the Monetary Authority shall consider factors such as the importance to the public interest, importance to Hong Kong’s monetary or financial stability, and Hong Kong’s function as an international financial center.

Designated stablecoin entities will be subject to the applicable regulatory requirements set out in Part 3 of the Ordinance, including financial resources requirements.

Restrictions on Offering Specified Stablecoins

The Ordinance provides that only the following institutions regulated by the Monetary Authority or the SFC (permitted offerors) may “offer” or “hold out as offering” specified stablecoins to the public of Hong Kong:

• A licensee under the Ordinance
• A virtual asset trading platform licensed by the SFC pursuant to the AMLO
• A licensed corporation that is licensed for a Type 1 regulated activity (i.e. dealing in securities) by the SFC under the SFO
• An authorized institution as defined in the BO

A person (person A) “offers” a specified stablecoin if person A makes, in the course of business, a communication to another person (person B) that presents sufficient information on all of the following matters so as to enable person B to decide whether to acquire the stablecoin from person A (1) the stablecoin to be offered, (2) the terms on which the stablecoin will be offered, and (3) the channels through which the stablecoin will be offered.

Similar to the concept of “holding out” to conduct regulated stablecoin activities, “holding out as offering” means “actively marketing” specified stablecoins to the public in Hong Kong or overseas, regardless of whether the marketing is conducted by oneself or by others and regardless of whether the person actually “offers” the specified stablecoins. This provision effectively prohibits the active marketing and offering of specified stablecoins to the public of Hong Kong through offshore means by non-permitted offerors.

Further, only specified stablecoins issued by a licensee may be offered to the public of Hong Kong. However, if the issue of specified stablecoins is not prohibited by Clause 8 of the Ordinance, permitted offerors may offer specified stablecoins not issued by a licensee to professional investors (as defined under the SFO). [7]

Ongoing Supervision, Enforcement, and Review

The Ordinance also gives the Monetary Authority considerable powers (including requiring the submission of documents and records, issuing instructions, making regulations, and issuing guidelines) to conduct ongoing supervision, stipulates penalties for unlicensed activities and violations (including criminal offenses and civil penalties), and establishes a Stablecoin Tribunal to review relevant decisions made by the Monetary Authority under the Ordinance.

Transition Period

Preexisting issuers of specified stablecoins with meaningful and substantial presence in Hong Kong prior to the commencement of the licensing regime may continue to operate under a non-contravention period of six months provided that they, within the first three months of the commencement of the licensing regime, (1) submit license applications to the Monetary Authority, (2) receive the Monetary Authority’s acknowledgment, and (3) undertake that they are capable of complying with applicable regulatory requirements. Preexisting issuers that do not fulfil all of (1) to (3) above will need to close their business in an orderly manner by the end of the fourth month.

Preexisting issuers who have fulfilled all of (1) to (3) above and are able to demonstrate their capabilities will be granted a provisional license for continuing their issuance activities until the Monetary Authority has made a final decision on the license applications. Nevertheless, the Monetary Authority may give a rejection notice to an applicant anytime if the Monetary Authority is not satisfied that the applicant can meet the licensing criteria and regulatory requirements. Upon receipt of a rejection notice, the issuer must cease operations in an orderly manner within one month.

Without a formal license granted by the Monetary Authority, no person (including an issuer with a provisional license) will be allowed to publish advertising on the issuance of specified stablecoins.

STABLECOIN ISSUER SANDBOX

As part of the legislative preparation, to promote innovation in stablecoin technology and test the feasibility of the regulatory framework, the HKMA launched the stablecoin issuer “sandbox” in March 2024, aiming to gain a deeper understanding of the business models of institutions that intend to issue FRS in Hong Kong and convey regulatory expectations and provide guidance. The sandbox allows participants to experiment with the issuance and application of stablecoins in a controlled environment and engage closely with regulators.

As of May 2025, the first batch of institutions participating in the sandbox include JINGDONG Coinlink Technology Hong Kong Limited, RD InnoTech Limited, and a coalition of Standard Chartered Bank (Hong Kong) Limited (SCBHK), Animoca Brands Limited, and Hong Kong Telecommunications (HKT) Limited (HKT).[8] These participants tested stablecoins in the sandbox, including reserve asset management, redemption process, and blockchain technology application.

Interestingly, the coalition of SCBHK, Animoca Brands, and HKT leverages the capabilities of Zodia Custody, a subsidiary of SCBHK, to provide institutional digital asset custody services.[9] Currently participants are in the testing phase, and the HKMA requires them to submit detailed reports to assess compliance and technical feasibility. It is expected that some participants will apply for a formal license after the Ordinance comes into effect.

The stablecoin issuer sandbox provides valuable data for the improvement of the regulatory framework, while attracting more international companies to pay attention to Hong Kong’s Web3 market.

LEGISLATIVE IMPACT & OUTLOOK

The Stablecoins Ordinance of Hong Kong establishes a comprehensive regulatory framework for the issue and offer of FRS, demonstrating Hong Kong’s determination to balance financial innovation and risk management. The Ordinance not only provides a clear compliance path for FRS issuers but also consolidates Hong Kong’s position as the Asian hub for Web3 industry by attracting global companies and enhancing market transparency.

However, its strict localization requirements (such as the need for senior executives to reside in Hong Kong) and high capital thresholds may pose a challenge to small- and medium-sized startups. Its high-standard requirements on reserve asset management, risk control, and AML/CFT compliance may also pose real challenges to FRS issuers. Companies outside Hong Kong that are engaged in stablecoin activities involving Hong Kong should also pay attention to the restrictions imposed under the Ordinance.

Nonetheless, for companies interested in participating in Hong Kong and Asia’s Web3 ecosystem (especially stablecoin issuance), now is a good time to seize opportunities and work with the regulators of Hong Kong.

The opportunities for Hong Kong’s Web3 industry are not limited to the above. In connection with the announcement of passage of the Stablecoins Bill, a Hong Kong government spokesman stated that it would continue to support the development of the virtual asset sector. Following the implementation of the virtual asset trading platforms and stablecoin issuers regulatory regimes, the Hong Kong government will soon launch consultations on virtual asset over-the-counter and custody services, and will promulgate the second policy statement on the development of virtual assets.[10]

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