The Hong Kong Monetary Authority (HKMA) has been inundated with applications for the coveted stablecoin issuer licence. As many as 80 companies have expressed interest. But regulators say only a select few will be approved when the first batch of licenses are revealed in early 2026.
Hong Kong is the first jurisdiction where stablecoin reserves must be backed exclusively by High Quality Liquid Assets – ultra safe, short-term holdings that can be converted to cash on demand.
This rigorous rulebook hasn’t proved a deterrent.
“It’s a sign that firms are eager to tap into the crypto system without taking on the market’s more volatile risks”, said Dr Hin Liu, a lecturer in law at Oxford University and digital asset consultant.
The collapse of JPEX
Liu said the new Stablecoin Ordinance, which came into effect on August 1, is a concerted effort to rebuild trust in Hong Kong’s digital asset market following a string of scandals.
“The most recent memory of crypto in the public is of NFT’s tanking and crypto scams and fraud. The Stablecoin Ordinance signals that Hong Kong is a robust place to do business.”
The latest, and largest was the collapse of JPEX, an unlicensed crypto platform which is accused of siphoning off roughly $166 million from Hong Kong investors between 2020 and 2023. Hong Kong police are still dealing with the fallout.
A central bank model for stablecoins
Hong Kong is putting its stablecoin governance under one roof. The HKMA, the city’s de facto central bank, is in charge of the entire stablecoin “stack” from licensing to reserve management, custody, redemption, and distribution. The Securities and Futures Commission (SFC) will continue to oversee the wider virtual asset ecosystem.
It is an unusual setup. In most jurisdictions, stablecoins are supervised by securities watchdogs or a patchwork of financial regulators, rather than a single monetary authority.
Under the new framework, the HKMA can grant, suspend or revoke licences, and investigate potential breaches.
Firms that dispute an HKMA decision may appeal to a newly created Stablecoin Review Tribunal and ultimately the Court of Appeal if needed.
The dedicated tribunal marks “a level of regulatory accountability that’s still missing in most jurisdictions,” said Joshua Chu, a lawyer, law lecturer and Co-Chair of the Hong Kong Web3 Association.
“Compared with the U.S, South Korea or Japan, where disputes can stretch on for years in normal courts, Hong Kong’s tribunal gives the industry a credible, expert focused point of reference,” he said.
Building institutional trust in uncharted waters
A core rule of the Stablecoin Ordinance is that issuers must be able to show they hold enough ultra-liquid assets to redeem every stablecoin at full value on demand.
It’s a challenge that extends beyond simply designing a solid regulatory framework.
“Maintaining a 1:1 peg day after day in order to create this institutional trust is crucial,” said Professor Alex Preda is a blockchain researcher at King’s College London.
“The quality of the collateral matters, but it doesn’t automatically create trust.”
As volumes scale, he said, issuers will need to make intraday adjustments – a job that cannot be done by automation. Preda believes that institutional trust will need to be earned in the emerging sphere of stablecoins.
“These big traditional financial institutions on the ground in Hong Kong have a lot of financial expertise, but they don’t have the engineering expertise to automate this kind of balance.”
Preda said given their limited crypto know-how, Hong Kong’s established players will most likely partner up with companies that specialize in digital assets.
It’s a trend that is already underway. Standard Charter’s Hong Kong unit has formed a joint-venture with Animoca Brands and HKT to apply for a Hong Kong dollar-backed stablecoin license.
Tokenization as reinvention
Hong Kong is racing to turn tokenized assets into the backbone of its financial infrastructure. Its tokenization mission is driven by three interlocking frameworks. The HKMA’s Fintech 2030 strategy, which sets the city’s overarching digital finance agenda. The SFC’s ASPIRe roadmap which regulates tokenised products, and HKMA’s LEAP framework which outlines the underlying settlement infrastructure needed to support them.
Joshua Chu said the city is positioning itself as a serious regulated institutional finance hub.
He said that business opportunities are shifting to tokenized funds, asset backed securities, and digital asset custody services, rather than on “overhyped models like direct tokenized real estate ownership”.
“These models face structural obstacles from stamp-duty and property-transfer rules as well as the unresolved legal status of tokens.”
This shift has already begun to shape the market. On November 13 HKMA launched its EnsembleTX pilot, to test tokenized bank deposits in real value transactions. The project follows recent tokenized money-market funds and tokenized gold issuances by major banks.
If the pilots are successful Hong Kong could become one of the first jurisdictions in the world to integrate tokenized deposits directly into its banking infrastructure.
Missing pieces in Hong Kong’s digital asset framework
But Chu said there were several gaps to fill before Hong Kong’s tokenisation framework can operate at scale.
He said the trading of tokenised securities remains thin because the city has yet to build the market infrastructure needed for investors to buy and sell these products easily. He added that regulators have yet to spell out what protections or disclosures retail investors would receive if these products eventually become widely available.
The city also faces a technical challenge – building systems that allow different blockchains to interact, but doing so in a way that respects both Hong Kong’s and Beijing’s regulatory boundaries.
Chu points out that regulators have also restricted stablecoins to preapproved users and wallets. It’s a requirement that prevents them from functioning like an open circulating payment instrument.
For regulators, that perimeter is a feature rather than a flaw. It’s a way to show that the city can innovate without inviting the kind of volatility that has rattled the crypto market.
Whether Hong Kong can maintain that balance as tokenisation spreads into more parts of its financial system will determine how far its ambitions can go, and how much of the global market it can realistically claim.
