China Hong Kong Enacts World's First Stablecoin Ordinance on August 1, 2025

China Hong Kong enacted the world’s first stablecoin ordinance on August 1, 2025, establishing a legal framework for the issuance and regulation of fiat-backed stablecoins within the region. The ordinance, passed by the Legislative Council in May 2025, enables licensed entities to issue stablecoins backed by traditional fiat currencies, including the Hong Kong dollar, and sets requirements for transparency, collateralization, and oversight [1]. The timing of the regulation aligns with broader global trends in stablecoin development, as countries including Japan and the United States continue to advance their own frameworks [2].

The ordinance builds on China Hong Kong’s long-standing role as a financial hub and signals the city’s intention to lead in the regulation of digital assets. Under the new rules, stablecoins must be fully backed by highly liquid assets and operate under the supervision of China Hong Kong’s Securities and Futures Commission and the Hong Kong Monetary Authority [3]. The legislation is seen as a crucial step in the city's broader push to position itself as a global leader in blockchain innovation and digital finance.

The implementation of the ordinance coincided with the launch of new financial products in China Hong Kong, including Bitcoin and ether ETFs, which began trading on August 18, 2025. These products, launched by local firm MicroBit Capital Management, track the U.S. dollar prices of the underlying cryptocurrencies and represent another milestone in the region's embrace of crypto markets [4]. The timing of the ETF launch and the stablecoin ordinance underscores a coordinated regulatory approach aimed at fostering innovation while ensuring investor protection.

Analysts suggest that China Hong Kong’s stablecoin framework could play a pivotal role in the internationalization of the Chinese yuan. Although onshore China remains cautious about stablecoins, the city has positioned itself as a testing ground for digital currency initiatives that may eventually support a yuan-backed stablecoin [5]. Such a development would represent a significant shift in the global stablecoin landscape, where the U.S. dollar currently dominates with tokens like Tether’s USDT and Circle’s USDC accounting for over 98% of the market [6].

The ordinance also reflects a broader geopolitical push by China to reduce its reliance on the U.S. dollar in international trade and finance. By promoting the development of stablecoins under its jurisdiction, China Hong Kong contributes to China’s strategic goal of expanding the use of the yuan globally. This aligns with reports indicating that the Chinese government is reviewing a roadmap that includes the potential issuance of yuan-backed stablecoins as part of its internationalization strategy [7].

However, challenges remain for the adoption of offshore renminbi stablecoins. In the short term, regulatory and market uncertainties may hinder their immediate success. Nonetheless, the framework laid out in the ordinance provides the necessary infrastructure for future development. Experts argue that China Hong Kong’s regulatory environment is well-positioned to support such innovation, particularly with the involvement of major Chinese technology firms [8].

The global context of stablecoin regulation is rapidly evolving. In Japan, the first yen-pegged stablecoin is expected to be approved within the year, while the U.S. enacted the GENIUS Act to provide a federal framework for dollar-backed stablecoins. These developments highlight the increasing importance of stablecoins in the global financial system and underscore the need for robust regulatory frameworks to manage risks and ensure market stability [9].

Sources:

[1] Coinfomania, https://coinfomania.com/hong-kong-stablecoin-ordinance-cipherbc-mpc-aug-2025/

[2] Cointelegraph, https://cointelegraph.com/magazine/japan-china-stablecoins-india-crypto-tax-asia-express

[3] Council on Foreign Relations, https://www.cfr.org/article/why-china-scared-dollar-stablecoins-and-how-it-will-respond

[4] South China Morning Post, https://www.scmp.com/business/banking-finance/article/3322590/bitcoin-and-ether-etfs-debut-hong-kong-after-unveiling-stablecoin-rules

[5] Reuters, https://www.reuters.com/commentary/breakingviews/china-stablecoin-push-is-better-late-than-never-2025-08-22/

[7] WRAL.com, https://www.wral.com/story/china-is-expanding-into-digital-currencies-hoping-to-promote-use-of-its-peoples-money/22125856/

[8] Reuters, https://www.reuters.com/business/finance/china-considering-yuan-backed-stablecoins-boost-global-currency-usage-sources-2025-08-21/