Hong Kong to Issue Stablecoin Licenses from August 2025

Hong Kong's Financial Services Secretary, Christopher Hui, has announced plans to issue a limited number of stablecoin licenses starting from August 2025. This initiative is designed to facilitate cross-border transactions and provide an alternative to developing nations facing currency devaluation. The move underscores Hong Kong's commitment to leveraging stablecoins for international payments, particularly in regions with vulnerable currencies. The government's approach emphasizes governance and regulation, reflecting a cautious yet positive stance towards digital currency applications.

The Stablecoins Bill, passed on 21 May 2025, establishes a licensing regime for fiat-referenced stablecoin (FRS) issuers. The Stablecoins Ordinance (Cap. 656) will come into operation on 1 August 2025, outlining key requirements for licensees. These include licensing, incorporation and capital, reserve assets management, redemption rights, risk management, and disclosure and governance. Any person or entity issuing an FRS in the region or maintaining a stable value with reference to Hong Kong dollars must obtain a license from the Monetary Authority. Licensees must be companies or authorized institutions incorporated outside the region with a minimum of HKD 25 million in paid-up share capital or other financial resources approved by the Monetary Authority. Each type of stablecoin issued must be backed by high-quality and highly liquid reserve assets, segregated from any other pool of reserve assets maintained by the licensee. The market value of the specified reserve asset must at all times be at least equal to the par value of the outstanding stablecoins of the type in circulation. Licensees must provide each stablecoin holder with the right to redeem and must not impose any conditions that are unduly burdensome or unreasonable fees. Adequate frameworks and internal controls must be in place to address operational, financial, technological, and compliance risks. Issuers must provide transparent information on each stablecoin issued, including a white paper, and obtain the Monetary Authority’s prior consent for key personnel appointments.

The implications for businesses are significant. Licensed issuers can offer stablecoins to retail investors, encouraging broader participation. Mainland institutions are expected to roll out tokenized real-world assets (RWA) in the city. However, companies should anticipate higher compliance costs, particularly for anti-money laundering, cybersecurity, and governance. Several prominent investment firms have announced their intention to apply for a stablecoin license in the region. Tianheng Capital, a well-known investment firm, has expressed its interest in obtaining a stablecoin license. Additionally, Tiansheng Capital and Luk Fook Securities have plans to apply for stablecoin licenses, exploring new business opportunities in RWA business innovation and the use of stablecoins for settlement. Luhua Securities also plans to apply for a virtual asset trading license and introduce stablecoin payment and settlement business. Ant International has announced plans to expand its stablecoin operations in the region, Singapore, and Luxembourg.

The passage of the Stablecoins Bill and the upcoming implementation of the Stablecoins Ordinance mark a significant step forward in the region's regulatory framework for virtual assets. The ordinance's stringent requirements for reserve assets management, redemption rights, risk management, and disclosure and governance aim to ensure the stability and security of stablecoins issued in the region. The move is expected to attract more investment and innovation in the virtual asset sector, further solidifying the region's position as a leading international financial center. The regulatory framework aims to stabilize regional economies by providing alternatives to developing nations facing currency devaluation, following a carefully regulated approach to digital asset integration. This initiative is part of a broader strategy to leverage stablecoins for cross-border transactions, reducing transaction costs and facilitating international payments. The government's cautious yet positive stance towards digital currency applications reflects a commitment to governance and regulation, ensuring the stability and security of the financial system.