Hong Kong officially introduced its long-awaited licensing regime for fiat-referenced stablecoins Thursday, tightening oversight of digital assets as the city pursues its ambition to become a global crypto hub.
Under the new law, which took effect on August 1, any company wishing to issue or market stablecoins to retail investors must first obtain a license from the Hong Kong Monetary Authority.
The licensing requirements span a host of compliance areas, including reserve asset management, redemption at par value, segregation of client funds, anti-money laundering protocols, disclosures, and fit-and-proper tests for operators.
The launch of the stablecoin regime marks the latest chapter in Hong Kong’s wider crypto policy overhaul. Over the past few years, the city has implemented a licensing framework for exchanges and introduced new rules on virtual assets as it seeks to rebuild its status as a financial gateway between China and the world.
It also comes after the U.S. passed the GENIUS Act, its first piece of federal stablecoin legislation.
The contrast between the two regimes is notable. “The key difference is in how the overseeing governments are structured,” Yat Siu, co-founder and executive chairman of Animoca Brands, told Decrypt. “In Hong Kong, the HKMA acts as the sole regulator, which simplifies things quite a bit, whereas in the U.S., regulation is layered due to the federal and state systems.”
While both frameworks require 100% reserve backing to ensure redemption stability, Hong Kong’s rules are already in force and offer a multi-currency scope, potentially positioning the city as a more flexible destination for stablecoin projects with global aspirations.
On the rise
Despite a relatively small domestic market, interest in stablecoins in Hong Kong is rising.
Andy K.T. Lau, a partner at David Cameron Law Office, said clients are increasingly looking at stablecoins not just as speculative instruments, but as potential payment rails.
“Clients are interested in exploring how stablecoins can facilitate both online and offline transactions, moving beyond mere trading purposes,” he said.
“I’ve observed an increasing interest from clients in forming partnerships with stablecoin issuers and payment platforms. I anticipate new applications across various sectors such as finance, retail, and local businesses,” he added.
“Many of my clients are eager to seize these opportunities, and I believe that collaboration between traditional financial institutions and digital asset platforms will be crucial for driving stablecoin adoption.”
That said, Hong Kong’s consumer payment landscape is already saturated. Walk into any shop and you’ll see terminals for cards like Visa and Mastercard, QR-based systems like AliPay and WeChat Pay, machines that tap Octopus Cards, and cash. Given that crowd, stablecoins aren’t expected to become the go-to payment system — at least as a standalone product that isn’t integrated into existing systems — anytime soon.
Instead, local businesses say the real opportunity may lie in international applications. Hong Kong’s global trading role gives it an edge for cross-border remittances and business payments, especially for firms that struggle with slow banking rails.
Among them, Edwin Cheung, CEO of Gate Dubai and a former head of business development at Gate HK, told Decrypt that firms in mainland China were “energetic” about the Hong Kong regime.
“They want to leverage this stablecoin regime either through their own stablecoin or they can use this stablecoin technology or blockchain technology to utilize their own payment network within their business.”
Though stablecoins aren’t permitted to be used under China’s strict cryptocurrency regulations, major e-commerce firms like JD.com and AliPay have confirmed they are exploring stablecoin use for their international businesses.
Broader use cases
Cheung said he had spoken to one travel firm that was interested in using stablecoins to make collecting payments from the different countries they work in easier. He said in some cases, it was taking up to thirty days to collect fees from various hotels and firms around the world.
“The timing is one [use]. The other part is they don’t have a local bank account or banking railways to collect from [for example] Argentinian or Brazilian hotels,” he said.
He added that adoption by large firms could drive greater interest on the retail level, comparing it to AliPay’s move into Hong Kong several years ago.
“Mass adoption has to come from a big company that has already got the ecosystem and that has inbuilt the stablecoin into it, and encourages the users to start using it—it will drive the growth,” he added.
Despite the momentum, concerns remain around cost and accessibility. Some firms, such as payment company Airwallex, have disavowed stablecoins completely, saying they don’t see how the technology solves pain points in international transfers.
Hong Kong’s rules also favor big players. Under current rules, stablecoin issuers must have at least HK$25 million in paid-up share capital, a bar that could deter smaller innovators.
“To encourage innovation, we should have tiered capital requirements,” Tiena Sekharan, Head of Strategic Reserve Solutions at Chavanette Advisors, told Decrypt. “Lower issuance should be possible with lower capital than the current requirement.”
She also called for a passporting mechanism that would let firms licensed in compliant jurisdictions like the U.S., Singapore, or the EU operate in Hong Kong with minimal red tape. “This would reduce licensing costs for compliant issuers,” she added.
