Hong Kong Enacts Official Stablecoin Regulation, Marking a Milestone in Digital Asset Governance

On May 21, the Hong Kong Legislative Council officially approved legislation establishing a licensing framework for fiat-backed stablecoins—digital assets tied to legal tender. This regulatory milestone marks a crucial advancement in Hong Kong’s digital asset strategy, aiming to foster financial innovation while ensuring market stability.

Under the newly approved framework, entities issuing fiat stablecoins within Hong Kong—or those pegged to the Hong Kong dollar, regardless of their location—are required to obtain a license from the Hong Kong Monetary Authority (HKMA). Licensed issuers must adhere to strict regulatory requirements, including the segregation of client assets, maintenance of a stability mechanism, and the obligation to redeem stablecoins at face value under reasonable conditions. The framework also enforces anti-money laundering (AML) and counter-terrorism financing (CTF) compliance, alongside regulations on risk management, transparency, auditing, and issuer qualifications.

The HKMA emphasized that the licensing regime strengthens investor protections and enhances market integrity. Only licensed financial institutions are authorized to issue fiat stablecoins in Hong Kong, and only stablecoins from regulated providers may be offered to retail investors. To mitigate fraud, advertising related to stablecoin issuance is restricted to licensed issuers, ensuring that the public is protected from unverified offerings.

Christopher Hui, Secretary for Financial Services and the Treasury, highlighted that the framework operates under the principle of “same activities, same risks, same regulation.” He explained that the regulation follows a risk-based approach, establishing a robust financial environment aligned with international standards, promoting sustainable industry growth, safeguarding consumer rights, and strengthening Hong Kong’s global financial hub status.

Eddie Yue Wai-man, Chief Executive of the HKMA, underscored that the regulation offers a flexible yet risk-based oversight model designed to support the stable and responsible growth of both stablecoins and the broader digital asset sector in Hong Kong.

Ding Zhao-fei, Chief Analyst at HashKey Group, described the regulatory framework’s approval as a major milestone in Hong Kong’s virtual asset policy evolution. He stressed that compliance has become a defining trend in the crypto industry, and stablecoins are no exception. The new framework addresses existing gaps, offering a clear compliance structure for fiat-backed stablecoins, including asset segregation measures, redemption assurances, and AML protections aimed at reducing systemic risks.

Ding also noted the broader impact of this regulation in advancing Hong Kong’s ambitions as a global Web3 and digital finance center. He pointed out that the legal clarity created by the framework lays the foundation for enhancing the internationalization of the Renminbi and developing offshore financial services, including potential offshore Renminbi stablecoin issuances.

Unlike the EU’s MiCA regulatory model, which follows a functional regulation approach, and Singapore’s tiered licensing system, Hong Kong’s framework introduces the concept of “value anchor regulation.” This regulation ensures that any claim involving the Hong Kong dollar, regardless of the issuer’s geographic location, falls under Hong Kong’s regulatory jurisdiction. Stablecoins issued within Hong Kong are fully regulated, and even those issued abroad must comply if they are pegged to the Hong Kong dollar. This framework enhances Hong Kong’s position in global stablecoin regulation, reinforcing its competitive edge in the international financial sector.