Hong Kong Delays Stablecoin Licenses Amid Rigorous Compliance Standards

Hong Kong's Monetary Authority (HKMA) has announced that no stablecoin licenses have been issued under its newly implemented regulatory framework, which took effect on August 1, 2025. The licensing process, part of the Stablecoins Ordinance (Cap. 656), mandates that stablecoin issuers maintain full reserve backing with high-quality liquid assets and comply with strict anti-money laundering (AML) and counter-terrorist financing (CFT) protocols. Despite the framework becoming active, the HKMA will not begin processing applications until August 31, 2025, with a final submission deadline set for September 30 [1].

The delay in issuing licenses has sparked uncertainty among market participants. The HKMA, led by Chief Executive Eddie Yue, has explicitly advised the public to disregard any unofficial claims of licensure, emphasizing that “no licence has been issued by the HKMA” to date [4]. This cautious approach reflects the regulator’s intent to ensure that only entities meeting high-quality standards receive authorization. While the original plan was to issue licenses by the end of 2025, the first licenses are now expected to be granted no earlier than early 2026 [3].

The regulatory framework is structured to promote financial stability and innovation by requiring stablecoins to be fully backed at a 1:1 ratio with fiat currencies such as the Hong Kong dollar (HKD) or U.S. dollar (USD). Issuers must also maintain a minimum paid-up capital of HK$25 million and undergo regular audits with customer funds segregated [5]. These requirements aim to prevent depegging and build user trust.

Several firms have already aligned with the regulatory direction. RD Technologies, for instance, has raised $40 million in Series A2 funding and is developing a Hong Kong dollar-backed stablecoin, with participation in the HKMA’s stablecoin sandbox. Other startups, such as Chocolate Finance and Syfe, are leveraging the clarity provided by the framework to expand digital wealth services in the region [5].

The scarcity of licenses is expected to intensify competition, with larger institutions like Ant Group and Standard Chartered likely to have an edge over smaller players. The limited number of licenses—potentially fewer than 10 in the initial phase—has raised concerns about market concentration and the challenges faced by early-stage firms. Some startups are exploring niche opportunities, such as CNH-backed stablecoins for cross-border trade [5].

The regulatory delay also highlights broader global trends, with other jurisdictions like the EU and U.S. advancing their own stablecoin regulations. Hong Kong’s approach, including mandatory compliance with the Travel Rule for all stablecoin transfers, aligns with international efforts to combat financial crime and supports Beijing’s long-term goals for yuan internationalization [6]. However, the high compliance costs and regulatory caution may slow the entry of smaller firms and affect market diversity.

For investors, the priority is to identify companies that demonstrate strong regulatory preparedness and address cross-border financial pain points. Early license recipients are likely to gain a first-mover advantage in a market projected to attract over $1.5 billion in funding by 2025 [5]. As the HKMA prepares to publish a public register of licensed issuers, transparency and compliance will be key differentiators in this competitive and rapidly evolving market.

Source:

[1] https://www.jsm.com/publications/2025/hong-kong-licensing-regime-for-stablecoin-issuers-goes-live-on-1-august-2025

[2] https://legalmaestros.com/current-legal-update/why-hong-kong-is-licensing-stablecoins-a-push-for-secure-digital-finance/

[3] https://coinpedia.org/news/hong-kong-launches-tough-stablecoin-rules-as-1-5b-pours-into-crypto-startups/

[4] https://www.xt.com/en/blog/post/hong-kong-launches-stablecoin-licensing-amid-market-skepticism

[5] https://www.ainvest.com/news/hong-kong-strategic-stablecoin-licensing-framework-implications-fintech-cross-border-payments-2508/

[6] https://notabene.id/post/hong-kong-stablecoin-travel-rule-compliance-standard