Hong Kong to Regulate Stablecoins from August 1 2025 with 100% Reserve Requirement

Hong Kong has announced the implementation of a new regulatory framework for stablecoins, set to take effect on August 1, 2025. This move is part of a broader effort to enhance the region's financial infrastructure and promote efficient cross-border payments. The Stablecoin Ordinance, passed in May 2025, mandates that issuers maintain 100% backing with cash or government bonds, ensuring stability and transparency in the market. This licensing regime will require stable token issuers to adhere to strict reserve management requirements, providing a robust framework for compliant projects.

The new policy is expected to bring significant transformation to the capital market by encouraging issuers to promote the application of stablecoins. The licensing system will not only formalize the issuance of stablecoins but also include pathways for the licensing of exchanges, custodians, and tokenization services. This comprehensive approach aims to create a secure and transparent environment for digital asset operations, fostering innovation while mitigating risks.

Financial Secretary Paul Chan has highlighted the regulation's potential in "Digital Asset Development Policy Declaration 2.0," stressing a need to address cross-border payment issues such as "slow speed and high costs." The regulation will provide a framework for stablecoin use, enhancing financial efficiency. With these changes, Hong Kong will require stablecoin issuers to obtain licenses from the Hong Kong Monetary Authority, limiting issuance to approved entities. The regulation anticipates significant shifts in financial practices. "Strive to create a favorable market environment," Chan stated, reducing fraud risks and ensuring consumer protection.

Major players like JD.com and Ant Group show interest in stablecoin licenses, indicating industry engagement. Financial Secretary Chan emphasized integration with the real economy. "The stablecoin, particularly when it is referenced to fiat currencies, has many user case scenarios," he noted, emphasizing the broad application beyond speculation. As Hong Kong emerges as a leader, "commitment to creating a favorable market environment" signals robust innovation.

The implementation of the stablecoin licensing regime is a critical step in Hong Kong's digital asset policy, known as Policy 2.0. This policy is designed to position the region as a leader in the global cryptocurrency landscape. By establishing clear regulatory guidelines, Hong Kong aims to attract more compliant projects and enhance its reputation as a hub for digital asset innovation. The new regulations are expected to provide a stable foundation for the growth of the stablecoin market, ensuring that issuers operate within a well-defined legal framework.

The stablecoin licensing regime will also play a pivotal role in the development of Capital as a Service (CaaS) operations. By mandating reserve management requirements, the regulations ensure that stablecoins are backed by sufficient assets, thereby maintaining their value and stability. This approach is crucial for building trust among users and investors, who rely on stablecoins for their financial transactions.

In summary, Hong Kong's decision to regulate stablecoins from August 1, 2025, marks a significant milestone in the region's digital asset journey. The new licensing regime, with its stringent reserve management requirements, aims to create a secure and transparent environment for stablecoin issuance. This move is expected to drive innovation in the capital market and position Hong Kong as a global leader in digital asset regulation.