Introduction to Hong Kong Stablecoin Bill

Hong Kong's Stablecoin Bill was officially passed by the Legislative Council of the Hong Kong Special Administrative Region on May 2025, 5. It aims to introduce a regulatory system for issuers of fiat-referenced stablecoins to improve Hong Kong's virtual asset regulatory framework, balance financial innovation and financial stability, and protect the rights and interests of investors. The following is an introduction to the main contents and background of the bill:

back ground
With the rapid development of the virtual asset market, stablecoins are widely used in payment, investment and blockchain ecosystem due to their characteristics of being pegged to fiat currencies (such as the US dollar or Hong Kong dollar), but their expansion may also bring monetary and financial stability risks. The Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB) published a consultation document in December 2023 to collect opinions from the industry and the public, and announced the consultation summary on July 12, 2024, confirming the need to establish a regulatory regime for stablecoin issuers. The bill was submitted to the Legislative Council for first reading on December 7, 17, and will complete the legislative process in 2024.

1. Hong Kong Stablecoin Act (Definition)

Description Examples and Aiying’s interpretation
Stable value The value of a stablecoin is kept stable by reference to one or more assets. For example, stablecoins that use the U.S. dollar as a reference asset (such as USDT) will adjust as the value of the U.S. dollar changes to ensure that their value is relatively stable.
medium of exchange Stablecoins can be used as a payment tool for goods or services, to settle debts or as an investment tool. For example: using USDT to pay for online goods, or to repay loans; or as an investment tool to invest in stablecoin assets.
Electron transfer and storage Stablecoins can be transferred, stored, bought and sold electronically. For example: storing and trading stablecoins through digital wallets or trading platforms (such as Binance, Coinbase).
Distributed Ledger Stablecoins are based on distributed ledger technology, and transaction records are shared by multiple nodes and verified through a consensus mechanism. For example: Bitcoin, Ethereum and other distributed ledger systems based on blockchain technology ensure the transparency and immutability of every transaction.
Source of stability The source of stability for a stablecoin can be a single asset or maintained by a basket of assets. For example: USDT's value stability comes from the US dollar, while some other stablecoins (such as BASKET or Celo Dollar) may be supported by multiple assets (such as US dollars, gold, other cryptocurrencies, etc.).
  
Digital currencies that are not stablecoins
Types of Description Examples and Aiying’s interpretation
Digital currencies related to legal tender Currency issued by a central bank or government. Example: Central bank digital currencies (CBDCs), such as China’s digital yuan (e-CNY). These digital currencies are issued directly by central banks and have legal tender status, so they do not fall into the category of stablecoins.
Limited Use Tokens Limited use tokens as defined in the Anti-Money Laundering and Counter-Terrorist Financing Regulations. These tokens can usually only be used in specific scenarios. Example: Some merchants issue tokens that can only be used within their platform or ecosystem. For example, a retailer may issue a points token that can only be used in its store and cannot be converted into legal tender or used in other transactions.
Securities and futures contracts Securities or futures contracts as defined in the Securities and Futures Ordinance are a type of financial instrument. Example: **Security tokens or futures contracts are digital assets. These assets are essentially financial securities and are regulated by traditional securities markets. For example, some stablecoin projects raise funds through security tokens.
Stored Value Facility Stored value facilities, as defined in the Payment Systems and Stored Value Facilities Regulations, generally refer to those that have the characteristics of prepaid funds and can be used for payment. Examples: Prepaid cards issued by payment companies or tokens provided by e-wallets (such as Alipay, Apple Pay, etc.). These tokens are only used for payments at specific merchants, have no fixed value stabilization mechanism, and cannot be directly linked to the value of other assets.
deposit Deposits, as defined in the Banking Ordinance, refer to the currency that a bank accepts from customers for deposit, which is usually legal tender and is protected by deposit insurance, etc. Example: Bank deposits, where a customer deposits money into a bank account and the bank provides interest for this. These deposits are guaranteed by banks, do not have cryptographic properties like stablecoins, and are closely tied to the bank’s fiat currency system.
supplement:
1. The Monetary Authority can declare that certain stablecoins meet the standards and become "specified stablecoins" through government announcements. This means that a stablecoin has been officially certified and can be legally traded and used in the market. (It does not mean that it has been licensed, it just means that it has passed the official quality inspection)

2. Hong Kong Stablecoin Act (What activities are regulated?)

  Description Aiying's Interpretation
Definition of Regulated Stablecoin Activities Refers to activities involving stablecoins conducted in Hong Kong or elsewhere that may affect Hong Kong’s monetary stability, financial stability or its function as an international financial centre. - Issuance of stablecoins: If a company issues stablecoins, this behavior may affect Hong Kong’s monetary policy and therefore requires supervision.

– Promotion of stablecoins: If a company promotes its stablecoin, especially if the stablecoin is linked to the stability of the Hong Kong dollar, it may also have an impact on the Hong Kong economy and need to be regulated.
Significant impact assessment The Monetary Authority will assess the impact of stablecoin activities on Hong Kong’s monetary stability, financial stability or functions as an international financial centre. If the impact of the activities is significant enough, they may require regulation. If the extensive use of a stablecoin affects people's confidence in the Hong Kong dollar and leads to a decrease in the circulation of the Hong Kong dollar, the Monetary Authority may deem that this activity will have a significant impact on monetary stability and decide to regulate it.
Public interest considerations The Monetary Authority will assess whether stablecoin activities involve public interest, such as whether they will affect public confidence in Hong Kong’s financial system or the stability of Hong Kong’s daily business activities. – If a stablecoin collapses, causing a large number of investors to lose money, this will not only affect the personal interests of investors, but may also damage public confidence in Hong Kong’s financial system and affect the normal conduct of daily business activities. The Monetary Authority may therefore decide to regulate such activities
Factors Affecting Financial or Monetary Stability Any stablecoin activities that may interfere with Hong Kong’s monetary policy, financial markets, or functions as a global financial centre. – If a stablecoin circulates very widely in the market, or even replaces the Hong Kong dollar for transactions on a large scale, it may interfere with the normal operation of Hong Kong’s monetary policy and financial system, and affect financial stability.
Factors involving public confidence Whether the activities of stablecoins could cause public confidence in Hong Kong’s financial system to waver, or whether they would affect the daily business activities of ordinary people. – For example, if a stablecoin suddenly collapses or experiences severe volatility, causing panic among investors and the public, it may have a negative impact on confidence in Hong Kong’s financial system. The Monetary Authority may decide to intervene or regulate the stablecoin activities in light of the issue of public confidence.
Key Points: The above regulatory activities are not limited to those occurring in Hong Kong, but also cover those occurring in areas other than Hong Kong.

Supplement: Definition of "offering specified stablecoins": enabling Party B (potential buyer or user) to understand the characteristics, purchase methods and usage scenarios of stablecoins, so as to make a decision whether to purchase them. An offer is made when clear instructions for purchase or acquisition are provided, whether through advertising, social media, email, or personal communication.

3. Hong Kong Stablecoin License (Application Requirements and Thresholds)

Claim Related penalties
1. Financial resource requirements The licensee must have sufficient financial resources to meet its obligations when they fall due.
Equity requirement: Minimum HK$2,500 million, or equivalent in other approved currencies.
Licensees must meet other financial resource requirements.
2. Reserve Asset Management 1. Each type of stablecoin must maintain a dedicated reserve asset portfolio to ensure that its market value is at least equal to the face value of the outstanding stablecoins.
2. The reserve asset portfolio must be managed separately from other funds.
3. Reserve assets must be high-quality, liquid and low-risk assets.
4. Implement sound risk management and audit procedures.
5. Disclose to the public the management, risks and audit results of reserve assets.
3. Redemption Mechanism 1. Licensees must provide stablecoin redemption rights and may not impose overly stringent conditions.
2. Redemption requests must be honoured promptly and paid with reference assets after deducting reasonable expenses.
3. Coin holders can redeem stablecoins in proportion when the license holder is insolvent.
4. Personnel requirements 1. The licensee must ensure that each controller is clearly identified and has the relevant qualifications.
2. Positions such as CEO, director, and stablecoin manager must be held by appropriate persons.
3. Senior managers need to have the knowledge and experience to perform their duties effectively.
5. Risk Management Policy 1. Licensees must establish sound risk management policies to ensure information security, anti-fraud and emergency response.
2. Must comply with the policy approved by the Monetary Authority.
6. Anti-money laundering and combating terrorist financing 1. Licensees must establish measures to prevent money laundering and terrorist financing related to stablecoin activities.
2. Ensure compliance with the Anti-Money Laundering and Counter-Terrorist Financing Regulations and related measures.
7. Purpose and robustness of stablecoins The purpose, business model and operational arrangements of a licensee issuing stablecoins must be prudent and comprehensive to avoid potential risks.
8. Restrictions on Business Activities 1. Licensees should focus on stablecoin business and must obtain approval from the Monetary Authority before engaging in other businesses.
2. Other business activities should not pose significant risks to stablecoin activities.
9. Disclosure Requirements 1. The licensee must publish a white paper to provide comprehensive and transparent information about the stablecoin.
2. Disclose information such as complaint handling and compensation mechanisms, stablecoin management and risk assessment to coin holders.
10. Complaints handling mechanism Licensees must establish and implement a sound complaint handling and compensation mechanism to ensure that coin holders can resolve problems conveniently and efficiently.
11. No Interest Policy Licensees may not pay or allow the payment of interest on stablecoins.
12. Recovery Plan and Downsizing 1. Licensees need to have plans in place to ensure that critical functions can be restored in the event of an operational disruption.
2. There must be an orderly scale-down mechanism to ensure that the redemption of stablecoins can be realized in an orderly manner.

4. Application Process for Hong Kong Stablecoin License

5. Hong Kong Stablecoin Bill (Illegal Acts and Exemptions)

Terms Description Related penalties Waiver/Exemption
Article 1: Restrictions on Regulated Stablecoin Activities
Any person is prohibited from engaging in or purporting to engage in regulated stablecoin activities unless he or she is licensed or qualifies for an exemption.		 - Summary conviction: HK$50 fine and 2 years’ imprisonment. A daily fine of HK$1 is imposed for a continuing offence.
- Conviction on indictment: a fine of HK$500 million and imprisonment for 7 years. A daily fine of HK$10 is imposed for a continuing offence.		 1. Licensed persons: Individuals or legal persons who have obtained permission or licenses from relevant regulatory authorities, such as financial institutions, virtual asset service providers, etc., can legally engage in regulated stablecoin activities.
2. Exemption rights: Under Section 13(1) of the Act, in certain special circumstances, the Monetary Authority may declare certain persons or categories of persons exempt from relevant restrictions. This usually applies to special regulatory environments. After approval, they do not need to comply with the requirements of this provision.
Article 2: Restrictions on offering stablecoins
Any person is prohibited from offering, or holding out as offering, stablecoins unless certain exemptions are met.
Article 3: Offence of publishing advertisements related to stablecoin activities
It is a criminal offence to publish or hold an advertisement knowing that it promotes unlicensed stablecoin activity.		 Level 5 fine (maximum fine of HK$50) and imprisonment for 6 months. 1. The publication of advertisements is in the ordinary course of business: If the advertisements or documents are published in the normal course of business, and the publisher is not directly or indirectly involved in the setting or control of the content of the advertisements, and the purpose of the advertisements is to provide an advertising platform for other companies or organizations, then they can be exempted from punishment. (For example, the Google advertising platform itself)
2. Disclaimer of broadcasting and other media: If the content of the advertisement is not set by the publisher himself, and is published in the daily business of broadcasters and other media, and the broadcasters comply with relevant laws, codes of practice and regulatory terms, then these publishers can also be exempted from liability. (For example, Bloomberg, CCTV)
Article 4: Transactions involving fraud and deception
In stablecoin transactions, it is a crime to engage in fraudulent or deceptive behavior (such as false statements or misleading predictions).		 – Summary conviction: a fine of HK$100 million and imprisonment for 3 years.
– Conviction on indictment: a fine of HK$1000 million and imprisonment for 10 years.
– The court may order the defendant to be prohibited from engaging in stablecoin transactions for a certain period of time.		 No exemption
Article 5: The offence of inducing others to obtain stablecoins by fraudulent means
Making false or misleading statements to induce others to enter into stablecoin-related agreements.		 – Summary conviction: a fine at level 6 and imprisonment for 6 months.
– Conviction on indictment: a fine of HK$100 million and imprisonment for 7 years.
Immunity
The Monetary Authority may exempt certain persons or categories of persons from compliance with the restrictions in sections 1 and 2.		 1. Monetary Authority’s power to exempt: The Monetary Authority has the power toExempting certain persons or categories of persons by proclamation, so that it is not restricted by the above terms. This generally applies where it is believed that the exemption will not create significant risks to coin holders, markets, or the financial system.The exemption will be based on the specific terms of the announcement., such as exempting certain stablecoin activities conducted under specific licenses, or exempting financial institutions that have obtained regulatory approval.

6. Hong Kong Stablecoin (Additional Conditions for License Application and Authority of the HKMA)

Description Related penalties
Apply for a license (details are reflected in other forms) Eligibility Those who can apply for a licence include:
1. Company;
2. An authorized institution established outside Hong Kong.
Application requirements The application must comply with the specified format (other forms are supplementary):
The application must include the address of the principal place of business, correspondence address and email address in Hong Kong.
Supplementary information requirements The Monetary Authority may require an applicant to provide additional information or documents that are necessary for determining the application.
If the applicant fails to provide the required information, the Monetary Authority may refuse to proceed with the application or return the application
Consequences of not providing information The Monetary Authority may refuse to proceed with the application;
Powers and duties of the Monetary Authority Types of ruling applications The Monetary Authority may make the following decisions:
1. Approval of a license authorizing regulated stablecoin activities;
2. Rejection of licence application.
Additional conditions to licence The Monetary Authority may impose conditions when granting a licence (14-day response period);
– After a licence is granted, new conditions may be imposed under section 17 (requiring you to comply with certain specific rules or requirements when or after the licence takes effect). Of course, additional conditions may also be cancelled, which will also be notified in writing to the licensee).
Possible additional conditions include:
1. False regulations or restrictions on business activities;
2. Imposing requirements on the management, use and regulation of reserve assets;
3. Maintaining a higher level of financial resources;
4. Stop certain business activities;
5. Financial disclosure requirements;
6. Limit the value of the stablecoins issued;
Minimum Standard Requirements A licence must not be granted unless the Monetary Authority is satisfied that the minimum criteria are met.
Licence Refusal Notice If the Monetary Authority refuses a licence, he must notify the applicant in writing and state:
1. Rejection decision;
2. Reason for rejection.
License approval notification If a licence is granted, the Monetary Authority must notify in writing stating:
1. License number;
2. The effective date of the licence.

7. Hong Kong Stablecoin "Banking Ordinance" & "Deposit Protection Scheme Ordinance" Amendment

Amendment of Terms Message the purpose Aiying's Interpretation
Article 2 (Definitions) 1. Definition of banking business: "Checks" were deleted and the business of collecting payments by stablecoin licensees was added.
2. Definition of deposit: Add “specified stablecoins” as a form of deposit.
3. New definitions: including “stablecoin activities”, “stablecoin licensee” and “stablecoin license”.		 1. Stablecoins are separated from traditional banking to avoid confusion.
2. Clarify the legal status of stablecoins and ensure that they are subject to legal recognition and supervision like traditional bank deposits.		 This means that if a stablecoin is approved by the Monetary Authority, it can be considered a valid form of deposit, similar to a traditional bank deposit. For example, a bank decides to launch a stablecoin deposit product. Customers convert funds into stablecoins and deposit them into bank accounts, and the bank promises to pay interest at a certain rate. At this time, stablecoins not only exist as a payment tool, but are also regarded as part of customer deposits and are protected by banking supervision.
Section 52 (Powers of Monetary Authority) 1. The powers of the Financial Services Commissioner are expanded to include supervision of stablecoin-related activities.
2. Add new provisions for the supervision of stablecoin licensees, authorizing the Financial Services Commissioner to supervise all companies holding stablecoin licenses.		 Expand the regulatory scope of the Financial Services Commissioner to ensure that stablecoin activities are also within the regulatory scope, strengthen supervision of the issuance and trading of stablecoins, and prevent potential financial risks. Suppose a bank has begun experimenting with issuing stablecoins to help customers with cross-border payments and asset management. Under the revised regulations, the bank must apply for a stablecoin license and ensure that its stablecoin issuance complies with regulatory requirements. If the bank fails to apply for a stablecoin license in a timely manner, it may face the risk of being punished or having its stablecoin business restricted.
Schedule 14 (Definition of manager) Add “regulated stablecoin activities” to the definition of “banking or other financial services” as one of the businesses to be regulated. Ensure that all institutions engaged in stablecoin-related businesses, whether banks or non-bank institutions, need to comply with financial regulatory requirements to ensure the legality and transparency of stablecoin activities.
Amendment to the Deposit Protection Scheme Ordinance 1. Section 1(i) originally defines what a protected deposit is. This revision removes the period and replaces it with a semicolon, indicating that new definition content is to be added next.
2.新加入的定义（第1(j)条）是：“由存款人持有并存放于某计划成员的、包含《稳定币条例》 (2024年第号) 第2(1)条所界定的储备资产的存款。”		 In order to adapt to this new financial instrument and market demand, the revised Deposit Protection Scheme Regulations include deposits containing stablecoin reserve assets within the scope of deposit protection. This would protect the interests of depositors involved in stablecoins, especially when these stablecoins themselves have functions similar to traditional deposits. Suppose a user deposits 100 million Hong Kong dollars into a bank's stablecoin account. The bank provides a digital currency called "HKD Stablecoin". This stablecoin maintains its value stability by holding Hong Kong dollar reserve assets. If the bank goes bankrupt, according to the amendment to the Deposit Protection Scheme Ordinance, the Hong Kong dollar stablecoins deposited by the user in the bank will meet the standards of the protection scheme, and the user can get back a certain amount of compensation through the Deposit Protection Scheme, provided that the requirements for the upper limit of the protection amount are met.

8. Hong Kong Stablecoin Bill (Transitional Arrangements)

Transition period Existing regulated stablecoin activities can continue If an entity has been conducting regulated stablecoin activities in Hong Kong before the effective date of the Act and has not violated the regulations within the first three months, it may continue the activities.
Activities within the first 6 months If an entity applies for a licence and provides the necessary documents within the first three months, and the Monetary Authority confirms receipt of the application, the entity may continue stablecoin activities within the first six months.
You need to submit relevant
Documentary evidence		 Entities need to submit two documents:
1. A written statement certifying that regulated stablecoin activities have been carried out in Hong Kong before the effective date of the Act.
2. A written undertaking that the entity will comply with all regulatory requirements once the provisional licence is granted and provide arrangements to ensure compliance.
provisional license Monetary Authority may grant provisional licence During the first 3 months: The Monetary Authority may grant a provisional licence if the entity meets the following conditions:
1. The entity has applied for a license and provided the necessary documents;
2. The Monetary Authority confirms receipt of the application;
3. The entity submitted a written statement and undertaking.
The Monetary Authority may issue a temporary licence to an entity, which will be valid for 6 months (if conditions are met), allowing the entity to continue to carry out stablecoin activities.
Invalidation of temporary license A temporary license will become invalid if:
1. The licence application is withdrawn;
2. The license application is rejected;
3. The entity obtains a formal license;
4. The temporary license will become invalid after the refusal notice is issued.
Rejection Notice If the Monetary Authority considers that an entity has failed to demonstrate that it has conducted stablecoin activities or has failed to demonstrate its ability to comply with regulatory requirements, it will issue a refusal notice to reject the entity's license application.
– The rejection notice will include the following:
1. Explain the refusal decision and reasons;
2. State that the entity may object to the decision;
3. Specify the deadline for objection and explain the time limit for objection.
Completion Arrangements No application for a licence has been made
Completion period		 1. If an entity does not apply for a license within the first three months, it will enter the winding-up period after the expiration of the three months.
2. The winding-up period starts on the last day of the first three months, and the entity must wind down all businesses related to regulated stablecoin activities.
Those who have applied for a licence
Completion period		 If an entity applies for a licence within the first three months but the application is not approved or is rejected, the entity enters a winding-up period.
– The start time of the completion period is as follows:
1. The day on which the refusal notice is issued;
2. The day on which the licence application is withdrawn;
3. The day on which the licence application is rejected and the rejection notice is received.
Duration of the completion period The completion period usually lasts for one month, starting from the day you enter the completion period.
– An entity may apply to the Monetary Authority for an extension of the closure period, and the Monetary Authority will decide whether to extend the closure period after considering the specific circumstances of the entity.
Provisions on activities during the course completion period During the winding-up period, entities may only engage in business activities related to the closure of regulated stablecoin activities and may not continue to conduct any new stablecoin transactions or businesses.
Monetary Authority
Requirements imposed		 The Monetary Authority may impose one or more of the following requirements on an entity entering into a winding-up period:
1. The entity must continue to carry out stablecoin activities or cease activities in a specified manner;
2. The entity’s disposal of assets during the winding-up period must comply with regulations;
3. The entity needs to preserve certain assets during the winding-up period to ensure that it can repay its debts.
Penalties for Violations Entities that violate closing period regulations face criminal penalties:
1. Summary conviction: fine up to $500,000;
2. Conviction on indictment: fine up to $10,000,000.

FAQs

The Act only applies toFiat Stablecoins(fiat-referenced stablecoin), that is, a stablecoin pegged to a fiat currency (such as the Hong Kong dollar or the US dollar). Algorithmic stablecoins, commodity-linked stablecoins (such as gold stablecoins) or crypto-asset-linked stablecoins are currently not within the scope of regulation, but the HKMA may adjust the scope of regulation in the future depending on market developments.
Activities that require a license include:
  • Issue fiat stablecoins in Hong Kong;
  • Issuing a stablecoin that claims to be pegged to the Hong Kong dollar (regardless of where it is issued);
  • Actively promote fiat stablecoins to the Hong Kong public.
  • Issuers operating outside Hong Kong but marketing to the Hong Kong public also require a licence. Unlicensed issuers are not allowed to offer stablecoins to retail investors in Hong Kong.
Supporters believe that the regulatory framework can enhance investor confidence and attract more institutions to participate in the Hong Kong dollar stablecoin market. However, critics point out that the market size and blockchain ecosystem applications of the Hong Kong dollar stablecoin may find it difficult to compete with the US dollar stablecoin, especially in DeFi and cross-border payment scenarios. In addition, strict supervision may increase compliance costs and affect the willingness of small issuers to participate.
Hong Kong’s regulatory framework has similarities with the United States (Stablecoin Innovation Act of 2025) and the European Union (MiCA Regulation), both of which emphasize reserve asset transparency and financial stability. However, Hong Kong's focus on the Hong Kong dollar stablecoin may require coordination with other jurisdictions on cross-border applications. The HKMA said it will work with international regulators to ensure supervisory consistency.
As a currency with relatively small global trading volume, the Hong Kong dollar faces challenges in market adoption of its stablecoin. US dollar stablecoins (such as USDT and USDC) dominate DeFi protocols and global payments, benefiting from the US dollar's status as an international reserve currency. Although Hong Kong’s regulatory framework provides legitimacy and credibility for the Hong Kong dollar stablecoin, its application scenarios may be limited to local payments, asset tokenization (RWA) or cross-border trade in the Greater Bay Area. The industry questions whether the Hong Kong dollar stablecoin can attract global developers to integrate into the DeFi protocol, as this requires huge liquidity and ecological support. The HKMA's sandbox program shows that companies such as JD.com CoinChain Technology are exploring Hong Kong dollar stablecoins, but whether they can break through regional restrictions remains to be tested by the market.
The bill’s licensing requirements and compliance costs may pose a barrier to entry for small and medium-sized Web3 startups, especially decentralized projects that wish to issue stablecoins. DeFi protocols typically rely on permissionless stablecoins, and Hong Kong’s regulatory framework requires centralized issuers to be licensed, which may conflict with the decentralized spirit of DeFi. However, the HKMA’s sandbox initiative and support for the tokenization of physical assets show its intention to promote Web3 innovation. The key lies in how future guidelines balance compliance and flexibility, such as whether decentralized autonomous organizations (DAOs) are allowed as issuers, or how to deal with regulatory issues of on-chain stablecoins. If regulation is too strict, it may cause innovative companies to move to regions with looser regulations such as Singapore or Dubai.
Hong Kong's advantages lie in its status as an international financial center, its mature legal system and its close ties with the mainland. The passage of the bill shows that Hong Kong is ahead of the United States (the Stablecoin Innovation Act of 2025 has just been passed) and the European Union (it will take time for MiCA to be fully implemented) in stablecoin regulation. However, Hong Kong’s market size and blockchain ecosystem are smaller than those of the United States or Singapore, and more incentives (such as tax incentives or sandbox expansion) are needed to attract international issuers. Additionally, the dominance of U.S. dollar stablecoins and the attractiveness of the U.S. market may lead international issuers to prefer the U.S. regulatory framework. Hong Kong needs to integrate with the Greater Bay Area and ASEAN markets to create unique stablecoin application scenarios in order to stand out in global competition.
Although the bill focuses on the Hong Kong dollar stablecoin, Hong Kong, as a bridgehead for the internationalization of the RMB, its regulatory framework may provide a basis for the experimentation of the RMB stablecoin. The People’s Bank of China has invested a lot of resources in the digital RMB (e-CNY), and Hong Kong’s stablecoin framework may become a “test field” for RMB stablecoins, especially in cross-border payment scenarios in the Greater Bay Area. The industry speculates that Hong Kong may explore a stablecoin model linked to e-CNY in the future, such as issuing stablecoins pegged to the RMB by licensed institutions for use in the blockchain ecosystem. However, the bill currently does not mention the RMB stablecoin, indicating that this may be a medium- to long-term goal rather than an immediate focus. Geopolitical factors, such as U.S.-China financial competition, may also influence this process.
  • Licence applicants must meet the following key requirements:
    1. Integrity and reputation：The applicant and its senior management must prove that they have no bad records and meet the requirements of HKMA as a “fit and proper person”. and proper) standard.
    2. financial resources：Applicants must have sufficient capital and liquidity to cope with operational risks and potential stablecoin repayment pressure.
    3. Management professionalism: Including a robust business plan, risk management framework and technical capabilities, especially the application of blockchain technology and reserve asset management.
    4. Reserve Asset Management：The issuer must prove that its reserve assets can fully support the circulation value of the stablecoin and accept regular audits by the HKMA.
  • HKMA’s assessment process may include:
    • Background check: Review the applicant’s corporate structure, shareholder background, and senior management qualifications.
    • Technical audit: Evaluate the stability and security of blockchain technology, such as the reliability of smart contracts.
    • Financial Audit: Ensure the transparency and liquidity of reserve assets to prevent the risk of insufficient reserves similar to the Terra/Luna event in 2022.
  • Problem background：The value stability of stablecoins is their core attraction, and the Terra/Luna collapse (2022) exposed the risk of decoupling. The industry is concerned about whether the bill can effectively prevent similar incidents and ensure repayment capabilities.
  • Detailed answer :
    • The bill requires issuers to hold sufficient reserve assets (such as cash or government bonds) to support the circulation value of the stablecoin 1:1 and to be subject to regular audits by the HKMA.Reserve assets must be highly liquid, low-risk assets, and issuers must submit detailed reserve reports.
    • To prevent decoupling, the HKMA may require:
      • Real-time monitoring: Use blockchain technology (such as zero-knowledge proofs) to verify the adequacy of reserve assets.
      • contingency plan：Issuers need to develop plans to deal with market fluctuations or repayment pressures, such as quickly liquidating reserve assets.
      • stress test: Although the bill does not explicitly mention it, the HKMA may require tests simulating extreme market scenarios in subsequent guidelines.
    • Response to decoupling events: The bill gives HKMA the power to investigate and impose penalties, including suspending or revoking licenses. If a decoupling occurs, HKMA can appoint a statutory administrator to take over the issuer's assets to ensure the safety of user funds. However, the bill does not detail how to deal with the decoupling risks of cross-border stablecoins, such as the systemic impact of US dollar stablecoins in the Hong Kong market.
    • potential impact：Strict reserve requirements help reduce the risk of decoupling, but may limit the issuer's investment flexibility, thereby affecting the yield and market attractiveness of stablecoins. The industry is concerned that if a chain decoupling occurs in global markets, Hong Kong's regulatory framework may find it difficult to completely isolate itself from external shocks.
  • The Stablecoin Review Tribunal is a new mechanism added to the bill designed to ensure regulatory fairness. The industry is concerned about its independence and actual operation.
  • Detailed answer :
    • The Stablecoin Review Tribunal is responsible for reviewing HKMA’s regulatory decisions, such as license rejections, penalties or license revocations. The tribunal is composed of independent legal experts to ensure procedural fairness.
    • Specific functions :
      • Complaints: Providing issuers with an appeal channel to challenge the HKMA’s decisions.
      • Regulatory balance: Prevent HKMA from having excessive power and protect the legitimate rights and interests of issuers.
      • Improved transparency: Public court hearings may enhance the transparency of the regulatory process.
    • potential impact: The establishment of a tribunal is conducive to creating a fair regulatory environment, but its effectiveness depends on the independence and efficiency of its operation. If the processing is inefficient, it may delay the issuer's business plans.
    • Industry Viewpoint: The industry is optimistic about the independence of the tribunal, but hopes that its members will have expertise in blockchain technology to understand the complexity of stablecoins.
  • DeFi is one of the main application scenarios of stablecoins, but its decentralized nature conflicts with centralized regulatory requirements. The industry is concerned about how the bill deals with DeFi applications.
  • Detailed answer :
    • The bill requires stablecoin issuers to be licensed, which applies to centralized entities such as banks or technology companies. However, DeFi protocols typically rely on decentralized issuance or permissionless stablecoins (such as DAI), which is inconsistent with the compliance requirements of the bill.
    • Impact on DeFi :
      • Compliance costs：If DeFi projects integrate Hong Kong dollar stablecoins, they need to cooperate with licensed issuers, increasing compliance costs.
      • Market restrictions：The circulation of unlicensed stablecoins (such as USDT) in the Hong Kong retail market is restricted, which may reduce the liquidity of DeFi protocols.
      • technical challenges：Decentralized issuers (such as DAOs) may find it difficult to meet licensing requirements, and the HKMA needs to explore new regulatory models, such as decentralized identity verification.
    • potential impact：The bill may encourage DeFi projects to cooperate with licensed institutions and promote the development of compliant DeFi, but it may also cause some decentralized projects to move to other regions.
The Hong Kong Act provides clear and detailed regulatory requirements (such as a minimum capital of HK$2500 million, local executive requirements, and retail marketing restrictions), which are more operational than the ambiguity of the US Genesis Act and the complexity of the EU MiCA. It allows pegging to multiple currencies (such as Hong Kong dollars, US dollars, and offshore RMB), and supports tokenized assets as reserves, demonstrating flexibility and foresight.
Hong Kong’s first-mover advantage and status as an offshore RMB settlement center make it an ideal hub for the issuance and circulation of stablecoins. The bill attracts participation from traditional banks (such as Standard Chartered) and Web3 companies (such as RD Technologies), and is expected to drive capital inflows into infrastructure (such as compliant wallets, payment gateways) and application scenarios (such as cross-border e-commerce, Web3 games).
Offshore RMB stablecoins can promote the use of RMB in global trade (especially the "Belt and Road Initiative"), reduce dependence on the US dollar, and enhance the liquidity of RMB assets (such as panda bonds and dim sum bonds). Through blockchain technology, it can improve the efficiency of cross-border payments and challenge the hegemony of the US dollar, but it needs to overcome foreign exchange controls and regulatory security challenges.
Algorithmic stablecoins (such as Luna/UST) are prone to triggering a "death spiral" due to market fluctuations and are not suitable for payment scenarios. Both Hong Kong and the United States require fiat-pegged stablecoins with full or excess reserves, backed by low-risk, high-liquidity assets (such as U.S. Treasuries and bank deposits) to ensure stability and compliance.
Hong Kong's regulations are more detailed, with clear capital requirements (HKD 2500 million), local executives and retail advertising restrictions; the US Genesis Act is still under discussion and adopts tiered supervision (stricter for issuances exceeding US$100 billion) with fewer details. Both places ban algorithmic stablecoins and only regulate stablecoins pegged to fiat currencies, but Hong Kong allows tokenized assets as reserves, reflecting its innovativeness. Both places require equivalent or excess reserves, which must be disclosed and audited regularly.
Hong Kong's regulations are more detailed, with clear capital requirements (HKD 2500 million), local executives and retail advertising restrictions; the US Genesis Act is still under discussion and adopts tiered supervision (stricter for issuances exceeding US$100 billion) with fewer details. Both places ban algorithmic stablecoins and only regulate stablecoins pegged to fiat currencies, but Hong Kong allows tokenized assets as reserves, reflecting its innovativeness. Both places require equivalent or excess reserves, which must be disclosed and audited regularly.
It is necessary to address foreign exchange controls and regulatory security considerations to ensure systemic and data security. The regulatory priority is national security and financial security over commercial efficiency, and the boundaries of free capital flows need to be explored cautiously. But Hong Kong's financial infrastructure and regulatory experience give it unique advantages.
All parties, including issuers, distributors (licensed exchanges, OTC), custodians, asset management companies, etc., need to find their correct positioning and leverage their differentiated advantages. Hong Kong’s supervision supports diversified roles, avoids involution, encourages collaboration rather than competition across the entire industry chain, and promotes the healthy development of the ecosystem.
It will promote the "third generation payment" system, based on blockchain-based tokenized currency, surpassing traditional banking and FinTech models and solving the problem of high cross-border payment costs. Hong Kong is expected to become a global stablecoin center, supporting multiple currencies and scenarios, with huge market potential and diversified ecological development

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