Hong Kong Enacts Dual-Track Stablecoin Framework to Strengthen RMB Global Role

China Hong Kong has enacted a comprehensive stablecoin regulatory framework, positioning itself as a competitive hub for digital assets. The Stablecoins Ordinance, passed by the Legislative Council on May 21, 2025, and effective August 1, 2025, introduces a dual-track licensing system to distinguish between asset-backed stablecoins (pegged to fiat or commodities) and algorithmic or uncollateralized models. The Hong Kong Monetary Authority (HKMA) will oversee the framework, requiring issuers to meet rigorous anti-money laundering (AML) standards, capital reserve requirements, and robust risk management protocols, including board-level oversight [1].

The ordinance extends jurisdiction to Hong Kong dollar (HKD)-pegged stablecoins issued abroad, aligning with broader efforts to enhance the RMB’s global role through HKD-backed digital assets linked to mainland China [2]. This approach mirrors global regulatory trends, such as the European Union’s Markets in Crypto-Assets (MiCA) framework, by applying proportionate oversight based on risk profiles. Hong Kong’s system aims to balance innovation with stability, imposing stricter rules on higher-risk stablecoins while easing compliance for simpler models [2].

Industry stakeholders, including payments firms and major financial institutions, are expected to apply for licenses, with estimates suggesting 50–60 firms will seek entry into the regulated market [4]. Fosun, a Chinese conglomerate, has already announced a HK$100 billion asset tokenization initiative leveraging the framework, underscoring its potential to attract institutional investors [8]. The HKMA’s licensing process emphasizes transparency, requiring real-time monitoring for algorithmic stablecoins and custodial safeguards for asset-backed variants [2].

The framework’s alignment with RMB internationalization goals is a strategic move. By promoting HKD-pegged stablecoins, the region aims to strengthen the local currency’s financial attributes and expand its use in cross-border transactions, particularly under the Belt and Road Initiative [5]. Domestic players like JD.com and Ant Group have advocated for yuan-based stablecoins to counter USD-dominated alternatives, reflecting the broader geopolitical push to diversify global currency usage [6].

Analysts note challenges in harmonizing cross-border compliance for multinational stablecoin projects, given divergent regulatory standards. For instance, while the dual-track system reduces investor uncertainty, inconsistencies with jurisdictions like the U.S. or EU could complicate operations for global issuers [2]. Additionally, the framework lacks explicit guidelines on capital adequacy and reserve ratios for stablecoin issuers, identified as a gap requiring future clarification [2].

The regulatory shift is expected to reshape the digital asset landscape in China Hong Kong. Institutional activity is shifting toward compliance-driven platforms, with licensed entry becoming a prerequisite for market access. Retail participation remains restricted to professional investors, reinforcing the framework’s focus on risk mitigation. Eddie Yue, HKMA Chief Executive, emphasized that the ordinance “demonstrates Hong Kong’s commitment to high standards of financial integrity in digital assets” [2].

By avoiding capital gains tax on stablecoins and enforcing professional investor eligibility, the framework aims to boost trading volumes while limiting exposure to retail participants. The absence of tax incentives, however, may not directly influence institutional adoption, which is instead driven by regulatory clarity and alignment with global trends.

As implementation approaches, collaboration between regulators and financial institutions will be critical to address evolving risks. The ordinance’s success will depend on its ability to attract stablecoin issuers while maintaining financial stability—a balance that has defined Hong Kong’s approach to digital asset regulation from the outset.

Sources:

[1] [HKMA Consultations on Obligations of HKMA-Licensed Stablecoin Issuers] (https://www.charltonslaw.com/hkma-consultations-on-obligations-of-hkma-licensed-stablecoin-issuers/)

[2] [Hong Kong Considers Dual-Track Stablecoin Framework] (https://www.ainvest.com/news/hong-kong-considers-dual-track-stablecoin-framework-balance-innovation-risk-2507/)

[4] [Stablecoins Are Breaking Out of the Circle] (https://www.gate.com/learn/articles/stablecoins-are-breaking-out-of-the-circle-in-depth-analysis-of-the-stablecoin-regulatory-policy-race-in-12-countries/10549)

[5] [Stablecoins — Asia's Race and Hong Kong's Ambition] (https://medium.com/@oax-foundation/part-three-stablecoins-asias-race-and-hong-kong-s-ambition-post-genius-act-591de93a76f8)

[6] [Asia Morning Briefing] (https://sg.finance.yahoo.com/news/asia-morning-briefing-animoca-exec-011602715.html)

[8] [Fosun Targets HK$100 Billion Asset Tokenization Push] (https://www.blockhead.co/2025/07/24/fosun-targets-hk-100-billion-asset-tokenization-push-with-new-hong-kong-platform/)

[9] [AI Meets Stability] (https://www.linkedin.com/pulse/ai-meets-stability-how-smart-intelligence-reshaping-hong-chun-pcbtc)