Introduction
Stablecoins, as cryptocurrencies pegged to fiat currencies or other assets, have become a critical component of the global digital financial ecosystem. They facilitate value storage and transfer in crypto transactions and show potential in cross-border payments and supply chain finance.
As an international financial hub, Hong Kong is actively developing a stablecoin regulatory framework to balance innovation and risk control. As of September 2025, Hong Kong’s Stablecoin Ordinance came into effect on August 1, marking a significant step in virtual asset regulation.
This report, aimed at those interested in Hong Kong’s stablecoin landscape, compiles and analyzes relevant information, including regulatory details, potential developments in mainland China, industry challenges, and future trends. It is based on publicly available data to provide an objective and comprehensive perspective.
Overview of Hong Kong’s Stablecoin Regulatory Framework
Hong Kong’s stablecoin regulation is primarily overseen by the Hong Kong Monetary Authority (HKMA), focusing on financial stability, anti-money laundering (AML), and fostering digital asset innovation. On May 21, 2025, the Legislative Council passed the Stablecoin Ordinance, effective August 1, establishing a licensing regime for fiat-referenced stablecoins (FRS).
Key Regulatory Requirements
- Licensing Regime: Entities issuing stablecoins in Hong Kong or issuing HKD-pegged stablecoins outside Hong Kong must obtain an HKMA license. Licensed activities include issuing, offering, and marketing stablecoins. The HKMA emphasizes a “same activity, same risk, same regulation” principle, requiring issuers to have sufficient financial resources, risk management, and reserve asset mechanisms.
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Reserve Asset Management: Issuers must maintain highly liquid reserve assets (e.g., cash or equivalent securities) and provide regular disclosures. Algorithmic stablecoins or arbitrage-dependent models are prohibited to prevent risks like the 2022 TerraUSD collapse.
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AML and Counter-Terrorism Financing (CFT) Requirements: Transactions exceeding HKD 8,000 require customer due diligence. On May 26, 2025, the HKMA issued a consultation paper emphasizing secondary market monitoring, such as blacklisting illicit wallet addresses. Final guidelines were released on June 30, 2025.
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Distribution Restrictions: Only licensed issuers, authorized institutions (e.g., banks), SFC-licensed virtual asset trading platforms, or Type 1 licensed intermediaries may offer stablecoins to the Hong Kong public, creating a closed regulatory loop.
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Transitional Arrangements: Existing issuers have a six-month grace period but must apply for a license by October 31, 2025, or cease operations by November 1, 2025.
Sandbox Mechanism and License Issuance
The HKMA launched a stablecoin issuer “sandbox” in March 2024, allowing participants to test business models in a controlled environment. By May 2025, the first batch of institutions joined. As of September 2025, no licenses have been issued, but 77 institutions, including Bank of China (Hong Kong) and Standard Chartered, have expressed interest. The HKMA indicates that initial licenses, expected as early as early 2026, will be limited to a “small number” to ensure compliance. The application deadline is September 30, 2025.
| Regulatory Aspect | Key Requirements | Purpose |
|---|---|---|
| Licensing Scope | Issuing FRS or HKD-pegged stablecoins | Ensure oversight of cross-border activities |
| -— | -— | |
| Reserve Assets | Highly liquid assets, fully backed | Maintain stable value, prevent runs |
| -— | -— | |
| AML/CFT | HKD 8,000 transaction threshold, identity verification | Prevent illicit use, protect reputation |
| -— | -— | |
| Distributors | Licensed entities only | Build a closed regulatory ecosystem |
| -— | -— | |
| Transition Period | 6 months, license application required | Allow existing businesses to adjust |
| -— | -— |
This framework positions Hong Kong as the first jurisdiction globally to comprehensively regulate FRS, ahead of the EU’s MiCA and the U.S.’s GENIUS Act.
Mainland China’s Stablecoin and Cryptocurrency Policy
Mainland China has maintained a cautious stance on cryptocurrencies, banning trading and mining in 2021. However, signs in 2025 suggest a potential re-entry into digital assets through stablecoins, driven by geopolitical and monetary competition, particularly in response to the rise of USD-pegged stablecoins like USDT.
Potential Development Path
Experts speculate that China may adopt a “three-step” strategy:
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Stablecoin First: The State Council is reviewing a roadmap to support offshore RMB-pegged stablecoins to enhance global currency use. In August 2025, sources indicated China is exploring RMB-pegged stablecoins for cross-border payments and trade settlement, bypassing capital controls and supporting the Belt and Road Initiative.
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Real-World Asset (RWA) Tokenization: Following stablecoins, RWAs are more acceptable to regulators as they support the real economy. In 2025, China Pacific Insurance (CPIC) launched a $100 million tokenized money market fund via HashKey’s chain, and Ant Digital tokenized bills of lading with the Global Shipping Business Network. The Shanghai Data Exchange approved its first real data asset (RDA), signaling policy relaxation.
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Underlying Blockchain Technology (e.g., Bitcoin): Acknowledging the need to embrace blockchain for competitiveness, though tightly controlled. Hong Kong serves as a “testing ground,” with its experience potentially guiding mainland applications, such as stablecoin use in Greater Bay Area supply chain finance.
Regulatory Dynamics
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The People’s Bank of China (PBOC) noted in June 2025 that stablecoin growth poses challenges to financial regulation, but the central bank digital currency (e-CNY) will dominate. In August 2025, regulators instructed brokers to cease publishing stablecoin-supportive research to curb domestic investor enthusiasm.
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Hong Kong’s Stablecoin Ordinance indirectly influences the mainland by providing a foundation for offshore RMB stablecoins, potentially for energy trade pilot projects. Experts suggest this could enhance China’s influence in G20 standards.
While mainland China restricts USD stablecoin use, projections indicate that by 2027, 10% of global GDP could be on-chain, driving RWA growth from fiat tokenization to physical assets like real estate and infrastructure.
Industry Challenges and Threats
Hong Kong’s stablecoin boom faces several challenges, which also impact mainland China.
Key Challenges
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International Pressure: Foreign entities fear Chinese stablecoins could be used to evade sanctions on countries like Russia and Iran, pressuring Hong Kong’s regulatory framework. The HKMA must ensure compliance to maintain its global financial hub status.
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Internal Fraud and Scams: The stablecoin frenzy has led to increased pyramid schemes and fraud in mainland China, potentially prompting regulatory crackdowns that could slow legitimate innovation. In 2025, Hong Kong’s market saw speculative bubbles, with the HKMA warning against unlicensed issuers.
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High Compliance Costs: Stringent licensing requirements, including technical security and risk management, burden startups. Industry voices note this may deter smaller players, similar to criticisms of the 2023 Virtual Asset Trading Platform (VATP) regulations.
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Regulatory Uncertainty: Cross-border transactions must navigate multiple jurisdictions, with smart contract vulnerabilities and technical risks prominent. The FATF’s 2024 report rated Hong Kong’s travel rule as partially compliant, and its 2025 review will test its AML framework.
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Cultural and Market Barriers: Hong Kong’s conservative financial culture may slow adoption, and retail trading is limited to four cryptocurrencies (e.g., Bitcoin, Ethereum), restricting diversity.
Unaddressed, these challenges could hinder growth but also foster sustainable development.
The Future of RWA Tokenization
RWA tokenization, an extension of the stablecoin ecosystem, brings traditional assets (e.g., bonds, funds) on-chain to enhance liquidity. Hong Kong and mainland China are advancing in phases:
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Fiat Currency Tokenization: Starting with assets like USDT, which dominate the market.
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Financial Asset Tokenization: The current focus, such as Shenzhen Futian Investment Holdings’ $70 million RWA bond (2.62% yield, two-year term) in 2025. Hong Kong launched an RWA registry platform on August 7, 2025, supporting green bonds and stablecoin integration.
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Physical Asset Tokenization: The most challenging phase, requiring reliable “oracles” to verify asset correspondence. Ant Chain tokenized $8.4 billion in energy assets; the RWA market is projected to reach $4.8 billion by the end of 2025.
Hong Kong’s platform will attract institutional participation and foster cross-border collaboration. Mainland China, through Hong Kong subsidiaries like China Asset Management, is experimenting with tokenized funds, with RWAs expected to capture a significant share of the global crypto market.
Blockchain’s Fundamental Value and Stablecoin Market
Blockchain, as a distributed ledger technology, represents the third evolution of accounting (following single- and double-entry bookkeeping), emphasizing decentralization, transparency, and globalization.
It eliminates intermediaries, enhancing efficiency and reducing costs. Stablecoins are primarily used not for daily payments but as a transaction medium and store of value within the crypto ecosystem, offering stability relative to Bitcoin’s volatility.
Balancing centralized regulation with decentralized protocols is key: core protocols are decentralized (like internet IP), while applications can be centralized. Hong Kong’s framework reflects this tension, ensuring safety through licensing.
Review and Outlook
Hong Kong has evolved from a “no prohibition” framework in 2019 to comprehensive regulation, with the SFC and HKMA issuing VATP and stablecoin licenses, positioning it as a bridge between mainland China and the world. Leveraging its common law system, Hong Kong is expected to attract global capital and become Asia’s Web3 hub.Looking ahead, Hong Kong’s stablecoin market will expand into RWA applications like payments and capital management.
Mainland China may gradually open up, with the first license issuance in 2026 marking a new era. However, geopolitical risks and fraud require vigilance. Overall, the outlook is optimistic: stablecoins will reshape global finance and promote RMB internationalization.
References: This report is based on HKMA official documents, Reuters, Bloomberg, and China Daily. For updates, refer to the HKMA website.