China Hong Kong to Issue Stablecoin Licenses by 2025, Aims to Lead Digital Payments

China Hong Kong is set to begin issuing stablecoin licenses before the end of 2025, with the number of licenses expected to remain in the "single digits." This cautious approach to digital asset oversight is part of a broader strategy to address real-world economic challenges, particularly in cross-border payments. The stablecoin licensing regime is anticipated to commence in August, with authorities planning to issue a limited number of licenses within the year. This move is aimed at leveraging stablecoins to tackle issues in regions with volatile local currencies or underdeveloped financial systems, potentially lowering transaction costs and enhancing the efficiency of international payments.

Initially, China Hong Kong's regulatory sandbox and licensing plans were focused on stablecoins pegged to the Hong Kong dollar. However, there is growing interest in offshore yuan-pegged alternatives, with Chinese tech giants reportedly lobbying for such offerings. This intensifies the regional stablecoin race, as China Hong Kong seeks to establish itself as a leader in digital payments. Any stablecoin involving foreign currencies will require close coordination with relevant jurisdictions, as regulators must consider exchange rate impacts and systemic risks.

China Hong Kong's regulatory activity in the stablecoin sector is part of a global trend, as the popularity of stablecoins surges worldwide. The region's decision to license stablecoins underscores its ambition to be a central figure in the future of digital payments across Asia and beyond. The new stablecoin bill passed by China Hong Kong expands its cryptocurrency licensing framework, targeting fiat-referenced stablecoins and introducing a licensing mandate for issuers under the Hong Kong Monetary Authority. This legislation builds on China Hong Kong’s 2023 rollout of a broader virtual asset licensing regime, which applies to crypto firms offering services to retail investors. Until recently, stablecoins were not covered under that framework.

Under the new law, stablecoin issuers must meet a series of requirements, including maintaining full asset reserves and segregating client assets. The Hong Kong Monetary Authority stated that the framework is designed to enhance financial stability and encourage financial innovation. The government confirmed that the stablecoin regime is expected to take effect later this year, with a transitional period to help industry participants adapt. This policy sets a global benchmark by mandating full reserve backing, strict redemption guarantees, and oversight by the Hong Kong Monetary Authority, providing institutional-level assurance for traders and strengthening China Hong Kong’s position as a frontrunner in regulated digital finance.