Stablecoin licensing to be limited by HKMA, with strict anti-money laundering regulations in place
Hong Kong Unveils Stablecoin Licensing Process Amid Concerns Over Market "Frothiness"
Hong Kong is set to become a leading stablecoin licensing jurisdiction in Asia, with the Hong Kong Monetary Authority (HKMA) set to unveil the application process for stablecoin licenses next week. However, the CEO of the HKMA, Eddie Yue, has expressed concerns about the "frothiness" in the market and the need to "further rein in the euphoria."
According to Yue's comments, many of the companies that have reached out to the HKMA for stablecoin discussions lack practical plans and concrete proposals. He suggests a need for more practical and concrete proposals in the stablecoin discussions, and hopes these companies will partner with others with relevant experience.
The regulatory framework for stablecoins in Hong Kong is outlined in the Stablecoins Ordinance (Cap. 656), which takes effect on August 1, 2025. Issuers of fiat-referenced stablecoins (FRS) must obtain a license from the HKMA, and the licensing regime mandates full backing of stablecoins by fiat reserves or liquid assets. Licensees must also comply with mandatory disclosure and audit requirements, and adhere to robust anti-money laundering (AML) and know-your-customer (KYC) controls. The HKMA and the Securities and Futures Commission (SFC) jointly oversee the regulatory framework.
Hong Kong operated a stablecoin issuer sandbox launched on March 12, 2024, which allowed institutions to test their stablecoin business models in a controlled, risk-limited environment while engaging directly with the HKMA to understand regulatory expectations. Participation in the sandbox is not mandatory, but sandbox participants have had early communication and guidance, potentially giving them more preparedness and clarity on compliance expectations. Three known groups admitted to the sandbox on July 18, 2024, include JD-SW Blockchain Technology (Hong Kong) Limited, Circle Innovation Technology Limited, and a joint venture among Standard Chartered Bank (Hong Kong), Amara Group, and Hong Kong Telecom.
The HKMA plans to issue a handful of stablecoin licenses in the first instance, and Yue believes that much of the discussion around stablecoins is "idealistic" and lacks practical use cases and concrete plans. Strong anti-money laundering rules will be unveiled next week, which may limit the ability of stablecoin businesses to scale rapidly in the short term. The number of organizations that have reached out to the HKMA to discuss stablecoins is limited to a few dozen, and some of these companies may struggle with technical expertise and risk management.
Despite these concerns, the launch of stablecoin legislation has caused spikes in stock prices and crypto tokens, and the HKMA's regulatory approach is designed to safeguard monetary and financial stability, promote trust in digital finance, and position Hong Kong as a leading stablecoin licensing jurisdiction in Asia.
| Aspect | Details | |--------|---------| | Regulatory framework | Stablecoins Ordinance (Cap. 656), effective August 1, 2025 | | Licensing authority | Hong Kong Monetary Authority (HKMA) | | Key license requirements | Full fiat backing or liquid assets; disclosures; audits; AML/KYC compliance | | Sandbox role | Testing ground since March 2024; not mandatory but offers early regulatory engagement | | Known sandbox participants | JD-SW Blockchain Tech, Circle Innovation Tech, Standard Chartered + Amara + HK Telecom JV | | Application status | Applications opened August 1, 2025; dozens of institutions preparing applications |
[1] Hong Kong passes stablecoin legislation [2] Hong Kong unveils stablecoin licensing process [3] HKMA's regulatory approach to stablecoins [4] Hong Kong's stablecoin sandbox
To deepen insights on Hong Kong's stablecoin sector, keep an eye on news about ['Hong Kong', 'stablecoins', 'regulation', 'finance', 'business']. [2] The Hong Kong Monetary Authority (HKMA) recently unveiled the application process for stablecoin licenses, marking a significant step in the region's ambition to become a leading stablecoin licensing jurisdiction in Asia. [3] With the regulatory framework outlined in Cap. 656, set to take effect in 2025, industry players are gearing up to apply, with many looking to partner with experienced organizations. [4] Previously, the HKMA operated a stablecoin issuer sandbox to allow institutions to test their business models and understand regulatory expectations, with the first handful of licenses expected to be issued next year.
