In-depth Interpretation of Hong Kong's Stablecoin Regulation: Regulatory Framework, Application Requirements and Industry Impact

On May 29, 2025, Hong Kong officially released the "Stablecoin Ordinance," which is set to take effect on August 1. The introduction of this regulation has attracted widespread attention both inside and outside the industry, with people generally hoping to understand what practical benefits this legislation will bring, what impact it will have on the Web3 industry, and how to apply for the relevant licenses.

This article will focus on the new "Regulations," providing a detailed overview and discussing the following key issues:

• What are the minimum requirements for applying for a stablecoin license?
• What businesses can be conducted with a stablecoin license?
• How are the reserve asset management and redemption mechanisms regulated?
• What does the "Regulation" mean for the industry? Will there be significant changes in the Hong Kong financial market landscape?

I. Interpretation of the Hong Kong Stablecoin Regulation Framework

1. Which stablecoin is regulated in Hong Kong?

The "Regulations" define the regulatory subjects as "designated stablecoins" operating in Hong Kong, which are stablecoins that maintain stable value entirely by referencing one or more official currencies, a calculation unit designated by the Monetary Authority, or a combination of these to store economic value. In practice, this refers to what is commonly known as fiat-backed stablecoins.

The Hong Kong government has chosen to focus its regulation on payment functions, as fiat stablecoins are most likely to circulate as "quasi-currency" in the financial trading market. The regulations explicitly restrict licensed entities from paying interest on the designated stablecoins they issue, in order to reduce the likelihood of them being regarded as savings-type financial products.

2. What activities of stablecoins are restricted?

The Regulations stipulate that the following activities are classified as "regulated stablecoin activities" and must be licensed:

• Issue designated stablecoin in Hong Kong
• Issue designated stablecoins pegged to the Hong Kong dollar outside of Hong Kong.
• Other activities specified by the financial management officer
• Actively promote oneself to the public to engage in or appear to engage in the above activities.

In addition, the regulations also provide for the identification of stablecoins, related advertisements, fraudulent activities, and more.

From the perspective of jurisdiction, the Hong Kong government not only regulates the issuance of stablecoins within Hong Kong, but also includes the issuance of stablecoins pegged to the Hong Kong dollar outside of Hong Kong in its regulation, reflecting a high regard for monetary sovereignty and financial stability.

3. How to apply for a stablecoin license?

Any company issuing, managing, or distributing specified stablecoins in Hong Kong, or recognized institutions established outside Hong Kong, must submit a formal license application to the Financial Management Commissioner. Applicants must meet the "minimum standards" specified in Schedule 2, which primarily include:

• Have sufficient financial resources and liquid assets
• Configure the corresponding reserve assets
• Establish redemption mechanism
• Management requirements
• Prudence and Risk Management
• Measures to combat money laundering and terrorist financing
• Information disclosure requirements
• Recovery plans and orderly scale reduction, etc.

The Hong Kong government maintains a consistent high standard and strict requirements for stablecoin license applicants. Applicants must recognize that this is not just an application process, but a comprehensive test of the company's capital strength, compliance capabilities, and risk control systems.

4. What compliance obligations do licensees have?

After obtaining a license, the licensee must fulfill a series of ongoing compliance obligations, mainly including:

• Pay annual fee
• Public display of license number
• Continuously meet the minimum standards
• Data Change Report

Obtaining a license is not a "one-time effort"; the financial regulator may temporarily add or modify the licensing conditions based on changes in market risk or the results of regulatory assessments.

The "Regulations" set high capital strength requirements for license holders, making it more suitable for companies with ample funds and larger asset volumes to strategically plan for medium to long-term layouts. Medium-sized enterprises should thoroughly assess feasibility and sustainability before making decisions.

5. How are the mechanisms for license cancellation, revocation, and suspension regulated?

If the licensee no longer meets regulatory requirements, the financial management commissioner has the right to:

• The suspension of the license shall not exceed 6 months.
• Voluntarily revoke the license based on the reasons specified in Appendix 4.

6. What protections does the regulation provide for stablecoin users?

The "Regulations" establish a legal protection mechanism for stablecoin end users, mainly including:

• Strictly regulate the promotional and marketing activities of license holders
• User rights protection mechanisms, such as requiring license holders to have sufficient reserve assets, establishing auditing mechanisms, etc.

For a wide range of investors, the key is to learn to identify licensed stablecoin issuers and to participate rationally in stablecoin trading and holding. With the implementation of the "Regulations", marginal projects and niche stablecoins that do not meet the licensed standards may face market clearing or even collapse risks, and investors should be highly vigilant.

7. How broad are the regulatory powers of the Monetary Authority?

The financial management officer plays an important role in the stablecoin regulatory framework in Hong Kong, with:

• Approval and Licensing Authority
• Daily supervision authority
• Direct investigation and evidence collection power when the licensee encounters significant operational risks

This indicates that the Monetary Authority has almost comprehensive regulatory power over stablecoins, with a high level of deterrence and enforcement.

2. What is the significance of the "Stablecoin Regulation Draft"?

1. Significance at the policy level

Hong Kong establishes a stablecoin regulatory system through local laws, effectively seizing the "digital currency issuance rights", particularly the legal status of stablecoins pegged to the Hong Kong dollar.

2. The Significance of the Web3 World

The institutionalization of stablecoins is key to driving an end-to-end closed loop for RWA. With the establishment of compliance frameworks, stablecoins are expected to become the "native funding layer" for RWA, reducing reliance on traditional fiat systems and enhancing on-chain financial efficiency and transparency.

For native Web3 projects, the biggest impact is being integrated into channels that can access larger-scale assets. Obtaining compliant status means being able to connect with institutional investors, RWA assets, and the traditional financial system, participating in higher quality and more explosive liquidity releases.

3. Is it possible for the RMB stablecoin to be implemented?

The implementation of stablecoin regulation in Hong Kong has opened up policy imagination for the "Renminbi stablecoin". If suitable RWA targets can be found in the future to provide a stable circulation carrier for the Renminbi stablecoin, its usage logic will become more valid. Hong Kong may become a "policy buffer zone" between the Renminbi stablecoin and the international Web3 market.

It is unlikely that the mainland will replicate Hong Kong's practices in the short term, but Hong Kong's "experimental field" experience may provide a blueprint for broader digital finance strategy exploration in the future.

3. Conclusion

With the official implementation of the "Regulations", Hong Kong has taken a key step in the global stablecoin regulatory race. This is not only an innovation in local financial policy, but also a strategic exploration for the entire Web3 ecosystem, RWA, and even the global monetary landscape. A brand new institutional space is being opened up, and Hong Kong has provided a clear roadmap for the legalization, systematization, and industrialization of stablecoins. This presents both a challenge and an opportunity for the entire Web3 world.