Rules, Risks and Enforcement
The Hong Kong Monetary Authority (HKMA) has implemented a comprehensive regulatory framework for stablecoin issuers, which took effect on August 1, 2025, under the Stablecoins Ordinance (Cap. 656). This regime addresses key risks identified by regulators, including potential fraud, price manipulation, and systemic financial shocks that could occur if stablecoin reserves are mismanaged. The framework is designed to safeguard monetary and financial stability while promoting responsible innovation.
A core requirement of the new rules is that any entity issuing fiat-referenced stablecoins in Hong Kong must obtain a license from the HKMA. To be eligible, issuers must meet strict criteria, including maintaining minimum paid-up share capital of HK$25 million and holding high-quality, high-liquidity reserve assets that fully back the stablecoins in circulation at a 1:1 ratio. Furthermore, licensed firms are obligated to implement robust anti-money laundering and counter-terrorist financing (AML/CFT) measures, which include conducting know-your-customer (KYC) checks on all users.
The Ordinance carries significant enforcement power. It is a criminal offense for any person to issue a stablecoin or even falsely claim to be a licensee or an applicant without the HKMA’s authorization. Penalties for violations can include substantial fines and imprisonment. The HKMA has already demonstrated its intent to enforce these rules, issuing a public warning in September 2025 against an entity marketing an unlicensed stablecoin. To guide the market, the HKMA has established a “Stablecoin Issuer Sandbox” for controlled trials and encourages prospective issuers to engage in early dialogue with its licensing team.
Market Impact and Timeline
The new regulatory framework is poised to reshape the stablecoin market in Hong Kong and beyond. Requirements for full reserve backing and independent public attestations are expected to enhance user trust and reduce the risk of a “run” on a stablecoin. However, the high licensing standards and compliance hurdles mean that only a handful of issuers are expected to be approved initially, which may temporarily limit product choice and trading depth in the market.
The regulatory timeline includes transitional arrangements for pre-existing issuers. Those operating before August 1, 2025, had until October 31, 2025, to submit a license application to the HKMA. If acknowledged, they can continue operations until January 31, 2026, while their application is reviewed. As of late September 2025, the HKMA had not yet granted any licenses, with the first approvals anticipated in early 2026.
For traders, treasury desks, and other market participants, it is crucial to verify the licensed status of any stablecoin issuer operating in or targeting Hong Kong. The HKMA maintains a public Register of Licensed Stablecoin Issuers on its website, which will provide up-to-date information on approved entities. Adopting or using unlicensed stablecoins carries significant legal and financial risks under the new regime.
