Hong Kong Enacts Stablecoin Law to Boost Digital Asset Market

On May 21, 2025, Hong Kong's Legislative Council passed a landmark bill establishing a comprehensive regulatory framework for fiat-referenced stablecoins. 

The legislation introduces a licensing regime for stablecoin issuers, requiring any entity issuing stablecoins in Hong Kong or those backed by the Hong Kong dollar to obtain authorisation from the Hong Kong Monetary Authority (HKMA). 

The new law mandates stringent requirements for reserve asset management, redemption procedures, and risk controls to safeguard public and investor interests. It adheres to the principle of "same activity, same risks, same regulation," ensuring that similar financial activities are subject to equivalent regulatory standards. 

The ordinance is expected to come into effect later this year, with transitional arrangements providing a grace period for existing and prospective issuers to comply with the new requirements. 

Legal Community's Perspective

Legal experts have welcomed the passage of the stablecoin bill, highlighting its potential to bring clarity and confidence to the digital asset sector in Hong Kong. The framework is seen as a significant step toward enhancing market integrity and fostering innovation within a regulated environment. 

The law's emphasis on anti-money laundering (AML) and counter-terrorist financing (CTF) measures aligns with international standards, reinforcing Hong Kong's commitment to maintaining a secure and transparent financial system. 

The legislation is expected to attract reputable issuers and service providers to Hong Kong by establishing clear guidelines for stablecoin issuance and operations, further solidifying its position as a global digital asset hub.

Implications for the Digital Asset Ecosystem

The enactment of the stablecoin law is part of Hong Kong's broader strategy to enhance its competitiveness in the digital finance landscape. The city has been actively developing its virtual asset market, with initiatives such as the stablecoin issuer sandbox project launched by the HKMA, which currently includes three active participants. 

The new regulatory framework is anticipated to provide a solid foundation for the growth of virtual assets, encouraging innovation while ensuring robust investor protection. It also positions Hong Kong to better compete with other jurisdictions, such as Singapore and the United States, which are also advancing their stablecoin regulations. 

Key Takeaways

• Hong Kong has passed a stablecoin bill establishing a licensing regime for fiat-referenced stablecoin issuers.

• The law requires issuers to obtain authorisation from the HKMA and comply with stringent operational and risk management standards.

• Legal experts view the framework as a positive development that brings clarity and confidence to the digital asset sector.

• The legislation is expected to strengthen Hong Kong's position as a leading hub for virtual assets and digital finance.