Hong Kong Stablecoin Regulatory New Rules: Positioning and Impact Analysis

On May 21, 2025, the Hong Kong Legislative Council passed the "Hong Kong Stablecoin Ordinance," marking a critical stage in stablecoin regulation. The ordinance will officially take effect on August 1, 2025, incorporating fiat-collateralized stablecoins (FRS) into a formal legal regulatory framework. This initiative aims to position Hong Kong as a compliant and forward-looking virtual asset center, capable of supporting the next generation of programmable finance within a rule-of-law framework.

Legal Infrastructure

The new regulations establish a complex semantic system for digital value. Stablecoins are defined as tools that are cryptographically secured, used as a store of value or medium of exchange, and operate on top of distributed ledger technology (DLT). "Specific stablecoins" are further defined as tokens pegged to official currencies or other approved units.

Regulated activities are extensive, including issuance, redemption, marketing, operational participation, and even indirect inducement involving Hong Kong residents. This broad definition ensures comprehensive regulatory coverage while minimizing the space for regulatory arbitrage.

The principle of fiat currency support is a core requirement. Any "specific stablecoin" must be fully redeemable for the fiat currency it is pegged to, especially the Hong Kong Dollar. Reserve assets must be high-quality, liquid assets, and denominated in the same fiat currency to which the stablecoin is pegged, in order to eliminate currency mismatch risks and value fluctuation risks.

The regulations clearly prohibit the use of high-volatility or low-liquidity assets as the anchoring basis, such as real estate tokens, commodity portfolios, or mixed asset indices. This practice effectively prevents regulatory arbitrage and reflects Hong Kong's prioritization of financial stability.

Permission Framework

The regulations introduce a comprehensive prudential licensing system, with main requirements including:

• Minimum paid-up capital of HKD 25 million
• Maintain a high-quality, liquid reserve asset corresponding 1:1 with the circulating stablecoin.
• Reserve assets must be placed in a trust or similar closed mechanism.
• A mechanism is in place to ensure that redemption requests are fulfilled at face value in real-time.
• The appointment of the controlling person, directors, and stablecoin management personnel must be approved.

License holders must continuously fulfill relevant obligations, including paying annual fees, reporting significant changes, and submitting annual compliance reports.

Regulatory Authority and Law Enforcement Tools

The financial management bureau has been granted powerful regulatory tools:

• Investigation Authority: Can request documents, conduct on-site inspections, and require sworn statements.
• Sanction mechanisms: including fines, revocation or cancellation of licenses, public warnings, confiscation orders, and appointment of statutory managers.
• Management intervention: A legal manager can be appointed to take over the operations of a licensed entity facing difficulties.
• Adjudication mechanism: Establish an independent "stablecoin adjudication office" for judicial review.

Prohibited Acts and Criminal Liability

The regulations clearly list the activities that are prohibited, with key prohibitions including:

• Unlicensed stablecoin operations are regulated activities
• Illegally issuing specific stablecoins
• Unlicensed or exempt from publishing stablecoin related advertisements
• Engage in fraud, misleading, and false advertising in stablecoin trading
• Inducing others to participate in stablecoin trading through false statements or disregard for the truth.

International Comparison and Hong Kong's Differentiated Positioning

Compared to the EU, Singapore, and the United States, Hong Kong's regulations exhibit unique regulatory choices:

• Mandatory immediate par value redemption obligation
• Introduce a fiat management mechanism
• Regulatory requirements are similar to those of traditional banks.

These differences reflect Hong Kong's priority on stability and fiat currency anchoring, rather than purely pursuing market growth or issuer flexibility.

The Difference in Tokenization of Physical Assets

The stablecoin regulations do not provide a direct path or legal recognition for real-world asset tokenization (RWA) projects. RWA projects face independent legal challenges such as cross-border asset transfers and QFII restrictions. Obtaining a stablecoin license does not equate to being legally allowed to engage in RWA business.

Actual Impact and Industry Adjustment

The new regulations will fundamentally change the way virtual asset companies operate in Hong Kong:

• Issuer: Must have sound financial governance, real currency backing, and clear legal responsibilities.
• Banks and trust institutions: May develop services such as stablecoin treasury management, KYC support, etc.
• Investors: Enhanced security, but initial stablecoin options may be limited.
• Global Platform: A dedicated compliance strategy needs to be established.
• Developers and DeFi builders: Compliance must be prioritized from the very beginning.

Conclusion

Hong Kong's stablecoin regulations are a strategic decision aimed at incorporating crypto finance into a systematic accountability framework. Market participants should prepare for strict audits, reserve checks, and ongoing regulatory dialogues. However, deeper issues remain to be addressed, such as the coexistence of programmable currency with a rule-of-law economy, and the balance between decentralized technology and centralized regulation. These challenges reinforce Hong Kong's core proposition: the key to financial evolution lies in sovereignty, stability, and systemic integrity, while regulation is a necessary condition for building trust.