Hong Kong’s new stablecoin regulatory framework, effective August 1, 2025, has attracted significant interest, with 77 institutions expressing intent to apply for licenses to issue fiat-referenced stablecoins, as reported by the Hong Kong Monetary Authority (HKMA).
These applicants include major banks like Industrial and Commercial Bank of China (ICBC) via its Hong Kong arm, Bank of China (Hong Kong), and potentially HSBC and Standard Chartered, alongside tech firms, e-commerce platforms, payment providers, and Web3 startups. However, the HKMA plans to issue only a limited number of licenses in the initial phase, with estimates suggesting just one or two approvals by early 2026, emphasizing strict criteria such as full reserve backing, robust compliance, and anti-money laundering (AML) protocols.
The competitive landscape reflects Hong Kong’s ambition to become a global hub for regulated digital assets, balancing innovation with financial stability.
The stringent requirements, including a minimum capital of HK$25 million and comprehensive risk management, favor well-capitalized institutions like major banks, potentially sidelining smaller players. Industry insiders suggest frontrunners like Bank of China (Hong Kong) and Standard Chartered, which have tested stablecoin use cases, may secure early licenses.
The HKMA’s cautious approach aims to ensure market credibility and avoid risks seen in past crypto failures like FTX, while fostering adoption for cross-border payments and tokenized assets. With 77 institutions vying for a limited number of licenses (potentially 1-2 in the initial phase), competition is intense.
This could lead to market consolidation, favoring established players like major banks (e.g., ICBC, Bank of China (Hong Kong), HSBC, Standard Chartered) with robust financial backing and compliance infrastructure. Smaller Web3 startups or less capitalized firms may struggle to meet the stringent criteria, potentially stifling innovation among smaller players.
Hong Kong’s selective licensing aims to position it as a credible global hub for regulated digital assets. By prioritizing stability and compliance, the city seeks to attract international investment and distinguish itself from less-regulated crypto markets, potentially drawing business from jurisdictions with stricter or unclear regulations.
The limited licenses and rigorous requirements (e.g., full reserve backing, AML compliance) aim to mitigate risks seen in past crypto failures like FTX or Terra-Luna. This could enhance consumer trust in stablecoins but may limit market entry, potentially reducing consumer choice in the short term.
Licensed stablecoins are expected to facilitate cross-border payments, tokenized asset settlements, and integration with Hong Kong’s digital asset ecosystem (e.g., tokenized bonds). Early adopters like banks with existing pilots (e.g., Standard Chartered’s cross-border payment tests) may gain a first-mover advantage, shaping use cases and market standards.
Hong Kong’s framework could influence regional competitors like Singapore or Dubai, pushing them to refine their own stablecoin regulations. Globally, it may set a benchmark for stablecoin oversight, especially as jurisdictions like the EU (with MiCA) and the US grapple with regulatory clarity.
The high capital requirements and compliance costs could exclude smaller fintechs and Web3 startups, potentially limiting diversity in the stablecoin market. This may drive some applicants to seek partnerships with larger institutions or pivot to unregulated markets.
Licensing Criteria for Stablecoin Issuers in Hong Kong
Only licensed institutions can issue fiat-referenced stablecoins. Applicants must obtain a license from the HKMA, with the process prioritizing entities demonstrating robust financial and operational capabilities.
Stablecoins must be fully backed by high-quality, liquid reserve assets (e.g., cash or cash equivalents) held in segregated accounts. Reserves must be maintained at a value at least equal to the stablecoin’s circulating supply to ensure 1:1 redeemability.
Applicants must maintain a minimum paid-up capital of HK$25 million to demonstrate financial stability and capacity to absorb operational risks. Robust anti-money laundering (AML) and counter-terrorism financing (CTF) measures are mandatory, aligning with Financial Action Task Force (FATF) standards.
Issuers must have comprehensive governance frameworks, including clear policies for risk management, cybersecurity, and operational resilience. Applicants must be incorporated in Hong Kong and maintain a physical office with senior management based locally to ensure regulatory oversight and accountability.
Stablecoin holders must have the right to redeem tokens at par value (1:1 with the referenced fiat currency, e.g., HKD or USD) at any time, with clear redemption processes. Issuers must implement mechanisms to ensure price stability, such as regular audits of reserve assets and transparent reporting.
Issuers must provide clear disclosures on risks, redemption policies, and reserve management to protect users. Regular audits by independent third parties are required to verify reserve backing and compliance. Issuers must demonstrate secure technological infrastructure to prevent hacks, fraud, or system failures, with stringent cybersecurity protocols in place.
Senior management and key personnel must meet “fit-and-proper” criteria, ensuring they have the expertise, integrity, and track record to operate a stablecoin business. The HKMA offers a regulatory sandbox for applicants to test stablecoin issuance under controlled conditions before full licensing. This allows innovation while ensuring compliance with regulatory standards.
The stringent criteria reflect Hong Kong’s focus on financial stability, consumer protection, and regulatory credibility, but they create a high barrier to entry. Major banks with existing infrastructure and compliance expertise are likely to dominate early licensing, potentially limiting market diversity.
