HKMA's Stablecoin Dilemma: Curbing Risks Without Choking Innovation

The Hong Kong Monetary Authority (HKMA) has issued a stern warning against unregulated stablecoin issuance in the city, marking the first test of its newly implemented regulatory framework. The alert follows the launch of AxCNH, a stablecoin pegged to the offshore Chinese yuan by Hong Kong-based firm AnchorX, which has not received approval from local regulators. In a statement on its official WeChat channel, the HKMA clarified that no entity has been licensed to issue stablecoins in China Hong Kong, urging the public to remain cautious of unregulated productsFrancisco Rodrigues, ^[1].

The HKMA’s warning underscores the strict licensing requirements introduced under the Stablecoins Ordinance, which came into effect on August 1, 2025Hong Kong Monetary Authority, ^[2]. The regulatory regime mandates that stablecoin issuers meet stringent standards for licensing, capital adequacy, and governance. Key components include anti-money laundering (AML) and counter-terrorism financing (CTF) guidelines, as well as a public registry of licensed issuers. As of the warning’s issuance, no licenses have been granted, and the HKMA emphasized that holding unlicensed stablecoins carries significant riskHong Kong Monetary Authority, ^[2].

AnchorX’s AxCNH stablecoin has drawn particular scrutiny. The company claims a license from Kazakhstan’s Astana Financial Services Authority and states the coin will facilitate cross-border payments and tokenized real-world assetsFrancisco Rodrigues, ^[1]. However, the HKMA’s intervention highlights the regulator’s authority to enforce compliance even for entities operating outside its jurisdiction if they reference Hong Kong dollars. This aligns with the Ordinance’s extra-territorial provisions, which require overseas issuers referencing Hong Kong dollars to seek local licensingCooley, ^[3].

The timing of the warning is notable. China’s securities regulator recently advised brokerages to pause real-world asset (RWA) tokenization activities in Hong Kong, citing risk management concernsFrancisco Rodrigues, ^[1]. This broader regulatory caution reflects a coordinated effort to address potential systemic risks in the crypto sector. The HKMA’s chief executive, Eddie Yue, has also criticized the “unjustified trading volume and stock price surges” linked to stablecoin hype, emphasizing the need to “rein in the euphoria”Cointelegraph, ^[4].

Under the licensing process, applicants must submit proposals by September 30, 2025, to be considered in the first batch. The HKMA has set a high bar for approval, with Yue stating only a “handful” of licenses will be granted initially. Issuers must demonstrate viable use cases, technical expertise, and prudent operational frameworks. The regulator has also warned against misleading public communications, noting that falsely claiming to be a licensee or applicant is a criminal offense under the Stablecoins OrdinanceHong Kong Monetary Authority, ^[2].

The HKMA’s actions signal a broader shift toward institutionalizing oversight in Hong Kong’s crypto ecosystem. By aligning stablecoin regulation with traditional financial services, the authority aims to enhance investor protection while fostering innovation. However, the initial hurdles for applicants—such as complex equity structures and the need for coordination with overseas regulators—highlight the challenges of navigating the new regimeCooley, ^[3].

As the regulatory framework takes shape, market participants are advised to monitor the HKMA’s public register of licensed issuers, accessible on its website. The regulator’s proactive stance underscores its commitment to maintaining financial stability in a rapidly evolving sector. With China’s broader regulatory environment tightening, Hong Kong’s approach to stablecoins could serve as a model for balancing innovation with risk mitigation.