On 21 May 2025, the Hong Kong Legislative Council passed the Stablecoins Bill, which was gazetted as the Stablecoins Ordinance (Cap. 656) on 30 May 2025 (the Ordinance). The Ordinance introduces a regulatory regime for issuers of fiat-referenced stablecoins in Hong Kong.
A stablecoin is a type of cryptocurrency designed to minimise price fluctuations, typically by being pegged to another asset such as a fiat currency, a commodity, or sometimes another cryptocurrency. Recognising the growth of the stablecoin market and its increased use as a widely accepted means of payment, Hong Kong’s approach aims to establish a regulatory regime to mitigate financial stability risks and protect stablecoin users. The introduction of the Ordinance follows a public consultation by the Hong Kong Monetary Authority (HKMA) and the Financial Services and Treasury Bureau on the proposed framework.
The focus of the new regime is on fiat-referenced stablecoins (FRS), which are a type of cryptocurrency that purport to maintain their value by being pegged to one or more fiat currencies. In conjunction with Hong Kong’s existing legal framework for cryptocurrency, which currently includes a dual licensing regime for virtual asset trading platforms and service providers, this development bolsters the city’s standing as a premier global hub for digital assets.
While the exact date on which the Ordinance will come into effect is still unknown, the HKMA has indicated that the new regime is expected to take effect this year. On 26 May 2025, the HKMA released two consultation papers seeking feedback from market participants on:
- the proposed guidance with respect to the minimum criteria that licensed stablecoin issuers will be required to fulfil[1];
- the proposed anti-money laundering and counter-financing of terrorism regulatory requirements for licensed stablecoin issuers[2].
The two consultations are open for comments until 30 June 2025.
This article provides an overview of the proposed licensing system for FRS.
The law in this respect is complex. Please note that this article does not, and is not intended to, constitute legal advice, and should not be relied upon as such. Slotine can assist with regulatory compliance issues. Please contact us if you wish to learn more about this.
Scope of the new licensing regime
Which types of stablecoins are subject to the new licensing regime?
A stablecoin falls under the regulatory control of the HKMA if it qualifies as a “specified stablecoin”, meaning that it purports to maintain a stable value with reference wholly to one or more official currencies issued by the central bank of a jurisdiction, or any other unit of account, store of economic value and digital representations of value specified by the HKMA in the Hong Kong Gazette.
In this article, FRS should be understood as a reference to “specified stablecoins” as defined by the Ordinance. The definition of a “specified stablecoin” excludes central bank digital currencies and certain categories of digital tokens, deposits, securities and futures, floats, and stored value facility deposits that are already regulated under the current legislative framework. Notably, the Ordinance excludes the regulation of algorithmic stablecoins, which could potentially indicate a complete ban on them, similar to the approach under the European Union’s Markets in Crypto-Assets Regulation (MiCA), which effectively prohibits algorithmic stablecoins.
What activities are subject to licensing requirements?
The Ordinance covers three major activities:
- issuing FRS in Hong Kong in the course of business;
→ to determine whether FRS is issued in Hong Kong, the HKMA will consider factors such as the location where the stablecoin is minted and burned, the location where the day-to-day management and operations of the issuer take place, and the place of incorporation of the issuer[3];
- issuing FRS outside Hong Kong in the course of business if the FRS purports to maintain a stable value with reference (in whole or in part) to the Hong Kong dollar; and
- actively marketing the issuance of FRS to the public of Hong Kong (whether in Hong Kong or elsewhere);
→ to determine whether the issuance is actively marketed to the Hong Kong public, the HKMA will consider factors such as the target audience, the language used in the message, and whether there is a detailed marketing plan to promote the activity[4].
In general, the HKMA will adopt a holistic approach to determine whether a licensee has carried out any restricted activities. The HKMA can also introduce other regulated activities by publishing a notice in the Hong Kong Gazette, allowing the city’s legal framework to adapt to the ever-evolving cryptocurrency industry.
The Ordinance paves the way for a stringent regulatory framework that covers an extensive scope of activities, including offshore FRS issuers if the stablecoin is pegged to the Hong Kong dollar.
Licensing requirements
Subject to exemptions, any issuer intending to carry out regulated stablecoin activities must apply for a licence from the HKMA.
Licensing criteria
The Ordinance sets out the following minimum licensing criteria[5]. The HKMA’s expectations with regard to the licensing criteria are set out in the Draft Guideline on Supervision of Licensed Stablecoin Issuers.
Corporate status
- The licensee must be a Hong Kong company or an authorised institution incorporated outside Hong Kong
Financial resources
- Licensees, excluding authorised institutions, must have a minimum paid-up share capital of HK$25 million or equivalent financial resources approved by the HKMA
Reserve assets management
- Unless prior written approval from the HKMA is obtained, the reserve assets must be those to which the FRS is pegged
- The reserve assets pool must be segregated, and of high quality and high liquidity, with minimal investment risks
- The market value of the reserve assets must at all times equal or exceed the par value of the outstanding FRS in circulation
- Licensees must adopt measures for the segregation and management of reserve assets
Redemption
- Licensees must ensure FRS holders can redeem their coins promptly, without unduly burdensome restrictions or unreasonable fees
- Licensees must clearly disclose the redemption process, timeframe and any conditions or fees
Fit and proper person
- Each individual who holds a key position (chief executive, director, stablecoin manager, or controller of a licensee) must be deemed fit and proper for their role
The HKMA will assess factors such as the person’s criminal records, records of non-compliance with regulation (if any), financial position, and commitment to the licensee’s business
Knowledge and experience
- The officers responsible for the issuer’s day-to-day management and operations must possess appropriate knowledge and experience for their roles
Prudential and risk management
- Licensees must implement adequate, appropriate, and robust risk management policies and procedures to ensure data security, fraud detection, contingency planning, and operational safeguards
Anti-money laundering and counter-terrorist financing
- Licensees must implement adequate and appropriate control systems for anti-money laundering and counter-terrorist financing
Purpose and soundness of issue
- The issuance of the FRS must be prudent and sound, with regards to its purpose, business model, and operational arrangements
Business activities
- Licensees must have dedicated and sufficient resources for their stablecoin activities
- Licensees must obtain the HKMA’s prior consent before engaging in any other business activities
Disclosures
- Licensees must publish a whitepaper providing comprehensive and transparent information for each type of FRS issued
- Licensees must adopt and implement risk management policies and procedures to identify, prevent, manage, and disclose conflicts of interest between the licensee and FRS holders
Complaint handling
- Licensees must adopt and implement control systems to ensure that FRS holders have access to adequate, accessible, affordable, independent, fair, accountable, timely, and efficient complaint handling and redress mechanisms
- Complaint handling and redress mechanisms must not impose unreasonable costs, delays, or burdens
Prohibition of interest
- Licensees are prohibited from paying interest or allowing interest to be paid in relation to the FRS they issue
Recovery planning and wind-down
- Licensees must adopt and implement adequate and appropriate control systems to ensure timely recovery of critical functions in case of major operational disruptions
- Licensees must adopt and implement control systems for winding down activities and orderly stablecoin redemption
Personnel requirements
Licensees are required to have the following personnel, all of whom must satisfy the fit and proper requirement:
- a chief executive and an alternative chief executive, both based in Hong Kong; and
- a stablecoin manager based in Hong Kong.
Licence validity period and duties of licensed issuers
Under the Ordinance, the licence becomes effective on the date specified in the notice of grant, and is valid indefinitely until the licence is revoked at the decision of the HKMA, or when the licensee is wound up.
Ongoing requirements also apply to licensees, such as:
- obtaining the HKMA’s prior consent for appointing directors, chief executives, alternative chief executives, or stablecoin managers;
- notifying the HKMA within 14 days of any change in managers of the licensee, directors, controllers, chief executives, alternative chief executives, or stablecoin managers.
Potential sanctions for non-compliance
If a person offers or represents oneself as offering FRS without a licence and does not possess a reasonable excuse, they may be liable to fines of up to HK$5,000,000 and imprisonment for up to seven years upon conviction. A continuing offence is punishable with further fines of HK$100,000 per day. Further offences related to fraud and deception, the inducement of the acquisition of FRS through misrepresentation, and unauthorised advertising may apply.
The Ordinance also grants the HKMA investigatory and enforcement powers, including the power to require the production of documents and to mandate a licensee to take certain actions.
Transitional arrangements
Issuers already carrying out regulated stablecoin activities in Hong Kong with a meaningful and substantial presence before the commencement of the licensing regime may benefit from a transitional period. In order to benefit from a six-month non-contravention period, issuers must satisfy the following conditions within the first three months after the new licensing regime comes into effect:
- submit a licence application to the HKMA;
- obtain acknowledgment from the HKMA; and
- undertake that they are capable of complying with regulatory requirements, namely their capability to substantially meet the licensing criteria and other regulatory requirements.
Successful issuers will be granted a provisional licence allowing them to continue their FRS issuance activities until the HKMA makes a decision on their licence application. However, the provisional licence does not allow issuers to advertise the issuance of stablecoins.
If a pre-existing issuer fails to meet these conditions or has its licence application rejected by the HKMA, it must cease its business within a one-month “closing down period”. This period may be extended by application to the HKMA.
KEY TAKEAWAYS
- The scope of activities covered by the Ordinance is extensive, including extra-territorial issuance activities for Hong Kong dollar-referenced FRS.
- To obtain a licence, among other stringent requirements, an issuer must possess adequate financial resources or paid-up share capital amounting to a minimum of HK$25 million (or equivalent in another currency).
- Entities currently carrying out regulated stablecoin activities (as defined under the Ordinance) must prepare for compliance or risk committing an offence.
- The introduction of this Ordinance aligns Hong Kong with major jurisdictions such as the European Union, Singapore, Dubai, and the United Kingdom, all of which are actively implementing or proposing stablecoin regulations.
If you need regulatory advice in relation to cryptocurrency-related activities, please do not hesitate to get in touch with us.
[1] Draft Guideline on Supervision of Licensed Stablecoin Issuers
[2] Consultation Paper on the Proposed AML/CTF Requirements for Regulated Stablecoin Activities
[3] LC Paper No. CB(1)195/2025(04)
[4] LC Paper No. CB(1)195/2025(04)
[5] This list is not exhaustive. Please refer to Schedule 2 of the Ordinance for the full list of minimum criteria.