Hong Kong’s Stablecoin Push: Global Banks Vie for Tight-Knit Licenses

HSBC and the Industrial and Commercial Bank of China (ICBC)—the world’s largest bank by total assets—have reportedly signaled intentions to apply for stablecoin licenses in Hong Kong, as the region’s new regulatory framework for stablecoins takes effect. According to a report by the Hong Kong Economic Journal, both institutions are among the growing list of entities preparing to seek approval from the Hong Kong Monetary Authority (HKMA) to issue stablecoins. ICBC and Standard Chartered are seen as potential first-round license recipients, which could give them a strategic advantage in the market. Neither HSBC nor ICBC responded to requests for comment [1].

The new stablecoin regime in Hong Kong, which became effective on August 1, imposes stringent requirements on issuers, including a high bar for entry and a six-month transition period. The licensing framework criminalizes the promotion of unlicensed fiat-referenced stablecoins to retail investors and has already led to market volatility. At the time of the rules’ implementation, several stablecoin companies in Hong Kong reported double-digit losses, with some experiencing drops of up to 20% in a single day. Local market experts described the decline as a “healthy correction,” noting that the regulatory environment was more rigorous than anticipated [1].

According to the Hong Kong Economic Journal, 77 institutions had expressed interest in applying for stablecoin licenses by the end of August. The HKMA has indicated that it will likely issue only a small number of licenses in the initial phase, emphasizing the need for a cautious approach to managing the risks associated with stablecoin issuance. This measured rollout aims to ensure robust oversight and gradually test the stability of the local digital asset ecosystem. The regulator has also warned investors to remain vigilant against misleading promotions and unlicensed stablecoin offerings [3].

Following the introduction of the licensing framework, Hong Kong’s Securities and Futures Commission (SFC) also issued immediate guidance on cryptocurrency custody standards. The rules include sweeping security requirements and a ban on the use of smart contracts in cold wallet implementations, further reinforcing the regulatory emphasis on security and risk mitigation. These steps reflect a broader trend of tightening oversight in the cryptocurrency sector, as seen in other jurisdictions such as the European Union and the United States [2].

The development of Hong Kong’s stablecoin regime is being closely watched as a potential model for other financial hubs. The cautious approach by the HKMA contrasts with the more innovation-friendly stance taken in the U.S., where the bipartisan GENIUS Act has been passed to support dollar-backed stablecoins. In the EU, the Markets in Crypto-Assets (MiCA) regulation imposes strict compliance requirements on stablecoin issuers. Hong Kong’s approach, however, emphasizes a balance between fostering innovation and maintaining financial stability, a strategy that could influence future regulatory frameworks globally [4].

Source:

[1] HSBC, ICBC Reportedly Eye Hong Kong Stablecoin License (https://cointelegraph.com/news/hsbc-icbc-hong-kong-stablecoin-license)

[2] HSBC, ICBC Reportedly Eye Hong Kong Stablecoin ... (https://www.mexc.com/news/hsbc-icbc-reportedly-eye-hong-kong-stablecoin-licenses/88903)

[3] Hong Kong Crypto Regulation Tightens With Limited ... (https://coinpedia.org/news/hong-kong-crypto-regulation-tightens-with-limited-stablecoin-licenses/)

[4] Stablecoins: The BIS Flags Risks, The U.S. Seize ... (https://www.mondaq.com/fin-tech/1675566/stablecoins-the-bis-flags-risks-the-us-seize-opportunity-by-passing-the-genius-act-where-does-switzerland-stand)