Hong Kong Imposes Strict Fiat Stablecoin Licensing That Limits Mainland State Banks and Firms

On August 1, 2025, the Hong Kong Monetary Authority (HKMA) implemented strict new licensing rules for fiat-backed stablecoin issuers. The regulations significantly raise entry barriers, prioritizing financial stability and capital control over open innovation. The move is expected to reshape the territory’s stablecoin landscape, limiting participation from mainland Chinese state-owned entities and favoring established institutions with strong compliance resources.

Who is Affected and Why

State-owned enterprises and major mainland banks are likely to face restrictions—or outright bans—on obtaining stablecoin licenses or operating crypto exchanges in Hong Kong. This aligns with broader efforts to mitigate systemic risk and maintain strict capital controls. The rules will likely reduce the presence of mainland-based groups that had planned to issue tokens from Hong Kong, shifting market access toward entities with proven regulatory track records.

License Requirements and Operational Effects

The HKMA’s requirements include:

• Strong consumer protection measures

• Large liquid reserves

• Strict KYC/AML checks

• A minimum capital requirement of approximately HK$25 million (US$3.2 million)

Although over 40 firms initially expressed interest, fewer than ten are expected to receive licenses in the first phase. These rules will increase operational costs, compress profit margins, and favor incumbent financial institutions with deep compliance experience.

Strategic, Geopolitical and Decentralization Implications

While China has ambitions to internationalize the yuan using Hong Kong as a testing ground, capital control concerns are prompting a cautious stance. These regulations may delay experiments with RMB-backed stablecoins and could centralize stablecoin issuance among a few large, trusted players—reducing opportunities for smaller or decentralized projects.