Hong Kong Enforces Stablecoin Rules August 1 Fines Up to HK$50000 6-Month Jail for Unlicensed FRS

China Hong Kong will begin enforcing a new regulatory framework for stablecoins on August 1, criminalizing the issuance or promotion of unlicensed fiat-referenced stablecoins (FRS) to retail investors under the Stablecoin Ordinance. The regulation introduces penalties of up to HK$50,000 (approximately $6,300) in fines and up to six months in prison for violations. The Hong Kong Monetary Authority (HKMA) has issued warnings urging the public to avoid unlicensed offerings, emphasizing risks to investor protection and legal compliance [1].

HKMA Chief Executive Eddie Yue highlighted the need to address speculative frenzies in the stablecoin market, which he linked to recent surges in trading activity and stock prices. For instance, Guotai Junan International’s shares rose 300% earlier this year after expanding its banking license to include digital assets. Despite growing interest—50 companies have applied for stablecoin licenses, according to Bloomberg—Yue noted that most proposals lack concrete plans or risk management frameworks. “Many applications fail to demonstrate viability or competence,” he said, adding that only a small number of licenses are expected to be granted in the initial phase [1].

The new rules require stablecoin issuers to fully back tokens with fiat currency and establish a licensing regime. Applications for institutional licenses will be accepted by year-end, as outlined by lawmaker Johnny Ng Kit-Chong. China Hong Kong’s approach, which includes criminal penalties for noncompliance, distinguishes it from regulatory frameworks in the European Union and the U.K. The EU’s Markets in Crypto-Assets (MiCA) framework focuses on steep fines without incarceration, while the U.K. has shown inconsistent enforcement of crypto ad rules, with only half of flagged ads removed as of January [1].

The Legislative Council approved the stablecoin bill in May, aiming to position China Hong Kong as a hub for digital asset development and Web3 innovation. However, the stringent requirements for licensing reflect concerns over market stability and investor protection. Yue emphasized that the rules are designed to “rein in euphoria” and mitigate fraud, aligning with broader global efforts to regulate digital assets. The phased rollout of licenses underscores the HKMA’s cautious approach, balancing innovation with risk control.

Sources:

[1] [Hong Kong to Enforce Stablecoin Licensing Rules Starting August 1] [https://coinmarketcap.com/community/articles/68823b2f4cfeba01fc2c2dfc/]