Introduction
On May 21, 2025, Hong Kong's Legislative Council officially passed the third reading of the Stablecoin Regulation Ordinance Draft (referred to as the "Draft"). According to current progress, institutions can apply to the Hong Kong Monetary Authority (HKMA) to become compliant stablecoin issuers by the end of this year.
The Hong Kong SAR Government welcomed the passage of the Draft, stating it establishes a licensing system for fiat-backed stablecoin issuers, enhances the regulatory framework for virtual asset activities, and maintains financial stability while fostering innovation.
The Draft Addresses Market Regulatory Gaps
The Draft reflects the HKMA's balance between innovation and risk management:
100% Reserve & Segregated Custody:
- Issuers must maintain high-quality, liquid reserve assets to ensure timely redemption at face value.
Investor Protection:
- Stablecoin holders have the right to redeem at face value within a reasonable timeframe.
Strict Compliance:
- Anti-money laundering (AML), risk management, disclosure obligations, and auditor oversight are mandatory.
Licensed Trading Platforms:
- Stablecoins must be traded on licensed virtual asset platforms to ensure compliance.
This Draft marks a key step in virtual asset regulation, filling gaps for fiat-backed stablecoins while providing a clear cross-border compliance framework.
Sandbox Testing: First 5 Participants
In July 2024, Hong Kong announced its first sandbox participants for stablecoin issuance:
| Institution | Partnership Status | Key Focus |
|---|---|---|
| JD CoinChain Technology | Independent | Retail/Cross-border Payments |
| Round Dollar Innovation Tech | Independent | HKDR Stablecoin Development |
| Standard Chartered (HK) | Joint Application | Institutional Services |
| Animoca Brands | Joint Application | Web3 Integration |
| HKT | Joint Application | Telecom-Payment Synergy |
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Notable Developments:
- Standard Chartered plans to issue a HKD-pegged stablecoin via a joint venture.
- Round Dollar secured $7.8M funding for its HKDR stablecoin, targeting Ethereum-based solutions.
- JD CoinChain is testing retail payment integration with JD’s e-commerce platforms.
Licensing Transition: Who Qualifies?
The Draft mandates that all fiat-backed stablecoin issuers (including HKD-pegged tokens) must obtain an HKMA license.
Key Requirements:
- Minimum HKD 25M capital.
- High-liquidity reserves matching stablecoin circulation.
- AML/KYC and risk management frameworks.
Top Candidates for Licenses:
- Banks (e.g., Standard Chartered).
- Tech Giants with payment ecosystems (e.g., JD CoinChain).
- Blockchain-Fintech Firms (e.g., Round Dollar).
Sandbox participants have a head start, but must still undergo full licensing procedures.
FAQ Section
1. When will the Draft take effect?
The Draft is expected to be enforced by end-2025, with a transition period for license applications.
2. Can non-sandbox institutions apply?
Yes, but sandbox participants have tested compliance and may prioritize approvals.
3. What’s the penalty for unlicensed issuance?
Unlicensed issuers face legal action, including fines and operational bans.
4. How does this impact stablecoin users?
Enhanced safety and redemption guarantees for holders.
5. Will other stablecoins (e.g., USDT) be regulated?
Currently, only fiat-backed stablecoins fall under this Draft.
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Conclusion
Hong Kong’s Draft sets a global benchmark for stablecoin regulation, combining investor safeguards with innovation incentives. Banks, tech firms, and fintech pioneers are best positioned to lead this new era.
Stay updated with HKMA’s upcoming consultations on OTC trading and custody services.