KEY FACTS: Hong Kong’s Legislative Council unanimously passed the Stablecoin Bill, establishing a licensing regime for fiat-referenced stablecoin (FRS) issuers, with applications opening by year-end under the Hong Kong Monetary Authority (HKMA). The legislation mandates strict operational standards, including asset segregation, redemption at par value, anti-money laundering compliance, and transparent disclosures to ensure financial stability and investor protection. The bill is supported by extensive industry consultations and a 2024 sandbox program.
Source: Emblem of Hong Kong
Hong Kong Passes Landmark Stablecoin Bill
Hong Kong’s Legislative Council has unanimously passed the Stablecoin Bill, establishing a comprehensive licensing regime for fiat-referenced stablecoin (FRS) issuers. The legislation, which cleared its third reading on May 21, 2025, is a significant development in the region’s ongoing efforts to engage regulated digital asset ecosystem while ensuring investor protections and financial stability. The bill is expected to take effect by the end of 2025, with major institutions able to apply for licenses from the Hong Kong Monetary Authority (HKMA) later this year.
The Stablecoin Bill introduces a structured regulatory framework designed to govern the issuance of fiat-backed stablecoins, particularly those pegged to the Hong Kong dollar. Under the new Stablecoins Ordinance, any entity issuing an FRS in Hong Kong, or issuing an FRS that claims to maintain a stable value concerning the Hong Kong dollar (whether in or outside the region), must obtain a license from the HKMA. This requirement is to ensure that stablecoin issuers operate under strict oversight, adhering to international standards for financial stability, transparency, and consumer protection.
The legislation outlines stringent operational standards for licensed issuers. These include maintaining clear asset segregation to protect user funds, ensuring redemption at par value, and implementing reliable mechanisms to maintain price stability. Additionally, issuers must comply with anti-money laundering (AML) laws, robust risk management protocols, transparent disclosure obligations, and independent auditing requirements. Only licensed firms will be permitted to promote or advertise stablecoin products to the public, a measure intended to curb misleading marketing and enhance investor confidence.
Eddie Yue, Chief Executive of the HKMA, hailed the passage of the bill as a critical step toward creating a “robust and fit-for-purpose regulatory environment.” In a statement, Yue emphasized that the new framework would provide favorable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the entire digital asset ecosystem. He noted that the legislation is in line with international regulatory standards, positioning Hong Kong to compete with other jurisdictions like the European Union, the United Kingdom, and the United States, which are also advancing their stablecoin regulations.
Johnny Ng Kit-Chong, a member of the Legislative Council and a vocal advocate for blockchain technology, announced the bill’s passage on X, describing it as a “major milestone” for the region’s crypto regulation. Ng invited global enterprises and institutions to participate in shaping Hong Kong’s blockchain-driven future. In his words:
“It is expected that by the end of this year, major institutions will be able to apply to the Hong Kong Monetary Authority to become licensed stablecoin issuers...”
Ng emphasized that the legislation is just the “first step” toward building a comprehensive Web3 infrastructure in Hong Kong. He highlighted the potential for stablecoins to drive innovation in areas such as retail payments, cross-border trade, and peer-to-peer transactions. He also offered to personally facilitate connections and collaborations with stakeholders to advance Web3 development in Asia and globally, with Hong Kong at the forefront.
Image of the legislative assembly session. Source: Johnny Ng Kit-Chong
Hong Kong’s proactive approach to stablecoin regulation builds on efforts that began in 2023, when the region published a consultation paper outlining guidelines for stablecoin issuers. The introduction of the Stablecoin Bill earlier this year followed extensive consultations with industry stakeholders, showing a collaborative effort to balance innovation with regulatory oversight. The HKMA also launched a sandbox program in March 2024, allowing participants such as Standard Chartered Bank, Animoca Brands, Hong Kong Telecommunications, Jingdong Coinlink, and RD InnoTech to test stablecoin-related initiatives in a controlled environment. This sandbox has provided valuable insights into the practical challenges and opportunities of stablecoin issuance, informing the development of the new regulatory framework.
There is an intensifying competition to establish clear and effective stablecoin regulations globally. Stablecoins, a type of cryptocurrency designed to maintain a constant value by being pegged to fiat currencies like the Hong Kong dollar or the U.S. dollar, have become a critical component of the digital asset market. They are widely used by crypto traders to facilitate fund transfers between tokens and are increasingly explored for applications in payments and trade. However, their rapid growth has raised concerns about financial stability, prompting jurisdictions worldwide to develop regulatory frameworks.
The European Union has already implemented its Markets in Crypto Assets (MiCA) regulation, which began licensing stablecoin issuers in 2024. The United Kingdom is gathering feedback on draft legislation that will impact stablecoins, while the United States is advancing its stablecoin bill, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, through Congress. The U.S. Senate voted 66-32 on May 19, 2025, to move the GENIUS Act forward for debate, with expectations that it could pass by late May. However, the U.S. legislation has faced challenges due to concerns over potential conflicts of interest involving President Donald Trump’s crypto ventures, including his USD1 stablecoin.
Hong Kong’s Stablecoin Bill positions the region as a frontrunner in this global race, offering a clear and predictable regulatory environment that could attract major fintech and crypto companies. Establishing a licensing regime that prioritizes investor protections and compliance will help Hong Kong to differentiate itself from jurisdictions where regulatory uncertainty has hindered innovation. The region’s proactive stance is also seen as a response to the growing demand for stablecoins, which are viewed as a bridge between traditional finance and the decentralized world of blockchain technology.
The new legislation is expected to boost confidence in Hong Kong’s digital asset sector by addressing key risks associated with stablecoins. Recent high-profile incidents, such as the $15 million crypto laundering ring dismantled by Hong Kong police in May 2025, have underscored the need for robust regulatory oversight. The Stablecoin Bill’s requirements for asset segregation, regular audits, and AML compliance are designed to mitigate risks such as fraud, mismanagement, and market volatility.
As Hong Kong prepares to open its stablecoin licensing regime by the end of 2025, the region is poised to attract significant interest from global fintech and crypto firms. The clear regulatory framework, combined with Hong Kong’s strategic position as a financial hub in Asia, could drive substantial investment and innovation in the stablecoin and Web3 sectors. However, challenges remain, including the need to balance regulatory stringency with the flexibility required to foster innovation.
The success of the Stablecoin Bill will also depend on the development of real-world applications, as highlighted by Johnny Ng. Industry experts suggest that stablecoins could transform sectors such as cross-border payments, where high fees and slow transaction times have long been pain points. By enabling faster, cheaper, and more transparent transactions, stablecoins could unlock new opportunities for businesses and consumers in Hong Kong and beyond.
Moreover, Hong Kong’s efforts to regulate stablecoins are part of its push to integrate digital assets into its financial system. The region has already made strides in other areas, such as approving crypto staking services and issuing regulatory guidance for virtual asset trading platforms. These initiatives show Hong Kong’s commitment to embracing blockchain technology while maintaining a strong regulatory framework to protect investors and maintain financial stability.
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