Hong Kong Passes Stablecoin Bill, Licensing Set for 2025

On May 21, 2025, Hong Kong’s Legislative Council approved a landmark bill establishing a comprehensive licensing regime for fiat-referenced stablecoin (FRS) issuers.

Overview

On May 21 2025, Legislative Council member Johnny Ng Kit-Chong mentioned on X that the bill had passed its third reading, clearing the final hurdle for adoption. This move positions Hong Kong as a leading jurisdiction in regulating digital assets. 

The new framework mandates that any entity issuing stablecoins in Hong Kong, or those backed by the Hong Kong dollar, regardless of issuance location, must obtain a license from the Hong Kong Monetary Authority (HKMA). The ordinance is expected to come into effect later this year. Ng said, “It is expected that by the end of this year, major institutions will be able to apply to the Hong Kong Monetary Authority to become licensed stablecoin issuers.” 

Key Provisions of the Stablecoin Licensing Regime

The legislation outlines stringent requirements for stablecoin issuers to ensure financial stability and investor protection:

• Licensing Requirements: Entities must be incorporated in Hong Kong and maintain a minimum paid-up share capital of HK$25 million or 1% of the par value of issued stablecoins, whichever is higher.
• Reserve Asset Management: Stablecoins must be fully backed by reserve assets equal to their par value, with reserves segregated and secured. 
• Redemption Rights: Issuers are required to provide holders with the right to redeem stablecoins without undue restrictions or unreasonable fees. 
• Governance and Compliance: Licensees must appoint key personnel, including a CEO and Stablecoin Manager, who are ordinarily residents of Hong Kong and deemed fit and proper by the HKMA.
• Operational Standards: Issuers must implement robust risk management policies, anti-money laundering measures, and transparent disclosure practices, including publishing a stablecoin whitepaper.
• Penalties for Non-Compliance: Operating without a license can result in fines up to HK$5 million, imprisonment for up to seven years, and additional daily fines for ongoing violations.

Strategic Implications for Hong Kong’s Digital Asset Ecosystem

The enactment of this bill is a strategic move to bolster Hong Kong’s position as a global digital asset hub. The city aims to attract reputable stablecoin issuers and foster innovation in the fintech sector by providing regulatory clarity and robust oversight. 

This initiative complements Hong Kong’s existing regulatory frameworks for virtual asset trading platforms and its efforts to introduce digital bonds and tokenised assets.  The HKMA’s sandbox program, which currently includes three participants, serves as a testing ground for stablecoin issuance under regulatory supervision.  

This approach allows for iterative development and refinement of regulatory practices in collaboration with industry stakeholders. Moreover, the bill’s provisions align with international standards, reflecting Hong Kong’s commitment to maintaining financial stability while embracing technological advancements in the financial sector.

Industry Response and Future Outlook

The stablecoin bill has garnered support from major financial institutions and fintech companies. For instance, Standard Chartered, in partnership with Animoca Brands and HKT, has announced plans to form a joint venture to issue a Hong Kong dollar-backed stablecoin, pending licensing approval. 

As the ordinance comes into effect later this year, existing stablecoin issuers operating in Hong Kong must apply for provisional licenses within three months, with full compliance required within six months.  

This transitional arrangement ensures a smooth implementation of the new regulatory regime. Hong Kong’s proactive approach to stablecoin regulation sets a precedent for other jurisdictions and underscores its ambition to lead in the global digital finance landscape.