Hong Kong launches stablecoin regime

Key takeaways

• Hong Kong has established a comprehensive regulatory regime on the issuance, offering and marketing of fiat-referenced stablecoins, with the Stablecoins Ordinance coming into effect on 1 August 2025. Issuers, distributors and other intermediaries should be aware certain stablecoin-related activities may be regulated by the Hong Kong regime even if conducted outside Hong Kong.
• New licensing requirement - broadly, a person must have a stablecoin licence if it: (i) issues a specified stablecoin in Hong Kong; (ii) issues a specified stablecoin referencing (wholly or partly) the HKD; or (iii) actively markets an issuance of specified stablecoin to the Hong Kong public. The latter two trigger the licensing requirement whether it is conducted in or outside Hong Kong.
• Key licensing criteria include: (i) the full backing of issued specified stablecoins by reserve assets; (ii) minimum paid-up share capital of HK$25 million; and (iii) localisation requirements.
• Offering / distribution restrictions – only certain Hong Kong-regulated entities can offer specified stablecoins in Hong Kong or actively market (from anywhere in the world) such offering to the Hong Kong public. Specified stablecoins issued by stablecoin licensees can be offered to retail and professional investors; those issued by unlicensed issuers (that are not required to be licensed) can only be offered to professional investors.
• Transitional arrangement - pre-existing issuers of specified stablecoins can benefit from a six-month transitional arrangement under certain conditions.

Background

The Stablecoins Ordinance primarily regulates fiat-referenced stablecoin issuers and seeks to balance the potential monetary and financial stability risks posed by such stablecoins (e.g. the TerraUSD collapse) with the policy objective of fostering a sustainable virtual asset ecosystem in Hong Kong. The HKMA has issued guidelines and explanatory notes containing further details on the licensing criteria and anti-money laundering requirements for issuers. The regime also regulates the offering of specified stablecoins, governing who can distribute and to whom. It is proposed that there will be a separate licensing regime for intermediaries which provide dealing and custodian services for virtual assets (including stablecoins).

Scope

What stablecoin-related activities will be regulated?

Broadly speaking, activities related to issuance, marketing of the issuance and offering of specified stablecoins may be regulated. In particular, an issuer of specified stablecoins will require a licence from the HKMA (Stablecoin Licence) in certain circumstances.

What is a specified stablecoin?

The regime will only be triggered if the product in question is a specified stablecoin, which is a stablecoin that purports to maintain a stable value with reference wholly to one or more official currencies.[1] Commodity-linked stablecoins are therefore currently excluded, but there are powers for the HKMA to broaden the scope of specified stablecoin in the future.

A “stablecoin” is a cryptographically secured digital representation of value that, among other things:

1. is expressed as a unit of account or store of economic value;
2. is used (or intended to be used) as a medium of exchange accepted by the public for payment for goods or services, discharge of a debt and/or investment;
3. can be transferred, stored or traded electronically;
4. is operated on a distributed ledger or similar information depository; and
5. purports to maintain a stable value with reference to a single asset, or a pool or basket of assets.

Deposits, certain securities and futures contracts, float stored in stored value facilities (SVF), SVF deposits, central bank digital currencies, limited purpose digital representations of value (i.e. those that can only be used as a means of payment for goods or services provided by the issuer) are excluded from the definition.

Stablecoin licensing regime

What triggers the requirement for a Stablecoin Licence?

1. Carrying on a “regulated stablecoin activity”. This means issuing: (a) a specified stablecoin in Hong Kong in the course of business; or (b) a specified stablecoin outside Hong Kong in the course of business that purports to maintain a stable value with reference (wholly or partly) to the Hong Kong dollar; and
2. Holding out as carrying on a regulated stablecoin activity. This includes actively marketing, whether in Hong Kong or elsewhere, to the Hong Kong public (or a class of that public) that the person carries on or purports to carry on an activity that, if carried on in Hong Kong, would constitute a regulated stablecoin activity.

The HKMA’s Explanatory Note on Licensing of Stablecoin Issuers specifies that whether a specified stablecoin is “issued in Hong Kong” will depend on the particular circumstances of each case, including (but not limited to) factors such as the location of: (a) the issuer’s place of incorporation; (b) its day-to-day management and operations; (c) the minting and burning of the specified stablecoin; (d) where the reserve assets are managed; and (e) where the bank account for processing the cash flows arising from minting/redemption requests is maintained.

The issuance of HKD-referenced stablecoin whether in or outside Hong Kong will be caught.

The scope of “actively marketing” to the Hong Kong public will take reference from the SFC’s existing approach, including factors such as the language used in marketing, whether it is targeted at a group of people residing in Hong Kong, whether a Hong Kong domain name is used and whether there is a detailed marketing plan to promote the activity.

What is the scope and validity of a Stablecoin Licence?

Once a Stablecoin Licence is granted to an applicant (Stablecoin Licensee), it will authorise the Stablecoin Licensee to carry on any regulated stablecoin activity for which the application is made and the licence will remain valid until revoked. The licence can cover more than one issuance and type of specified stablecoins, though a Stablecoin Licensee should discuss with the HKMA before issuing an additional type of specified stablecoin such as one that references other official currencies. The HKMA has the power to attach any conditions to a licence that it considers appropriate, including requiring financial resources above the minimum level mentioned below.

What are the licensing criteria?

A Stablecoin Licence will not be granted unless the HKMA is satisfied that the applicant would fulfil the minimum criteria set out in Schedule 2 to the Stablecoins Ordinance. A Stablecoin Licensee must fulfil the minimum criteria on an ongoing basis.

The annex to this briefing contains a high-level summary of the minimum criteria set out in the Stablecoins Ordinance, as well as the related guidance issued by the HKMA in its Guideline on Supervision of Licensed Stablecoin Issuers (Licensing Guideline). The criteria and supervisory expectations apply to Stablecoin Licensees and cover (amongst other matters) reserve assets management (including independent attestation and audit requirements on the reserve assets), redemption and distribution of specified stablecoins (which will also be of relevance to distributors), minimum financial resources, localisation requirements and fitness and propriety of personnel. To avoid regulatory overlap, certain requirements do not apply to authorized institutions[2] (AIs) (e.g. banks authorised by the HKMA).

Are there other compliance obligations for Stablecoin Licenses?

Stablecoin Licensees will be regulated as a “financial institution” for the purposes of Hong Kong’s anti-money laundering and counter-financing of terrorism (AML) legislation. The HKMA has issued a Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers) (AML Guideline) to provide guidance on (amongst others): (i) due diligence measures to be undertaken on customers (including any third-party distributors), customer wallets and custodial institutions both in relation to stablecoin issuance and redemption; and (ii) ongoing monitoring of stablecoin transactions in the secondary market (beyond issuance and redemption), including where the stablecoins are held by non-customers.[3] Travel rule requirements for stablecoin transfers will also apply.

Stablecoin offering regime

Who can offer a specified stablecoin?

The offering of a specified stablecoin does not itself require a Stablecoin Licence. However, only “permitted offerors” can offer specified stablecoins in Hong Kong or hold out as offering specified stablecoins to the public in Hong Kong – this requirement applies even if the specified stablecoin is not issued in Hong Kong or references the HKD.

Offering a specified stablecoin means making a communication in the course of business to another person with sufficient information on the: (i) stablecoin; (ii) the offer terms; and (iii) channels through which it will be offered, to decide whether to acquire the stablecoin from the offeror. Holding out as offering includes a person actively marketing, whether in Hong Kong or elsewhere, to the Hong Kong public that it carries on or purports to carry on an activity that, if carried on in Hong Kong, would constitute an offering of a specified stablecoin.

Currently, permitted offerors are: (i) Stablecoin Licensees; (ii) AIs; (iii) SFC licensed corporations licensed for Type 1 regulated activity; (iv) licensed virtual asset trading platforms; and (v) SVF licensees. There is currently a public consultation on introducing a licensing regime for dealers and custodians of virtual assets[4], which may require certain categories of permitted offerors to obtain a separate licence for their stablecoin activity.[5]

Stablecoin Licensees engaging third party distributors should therefore only engage permitted offerors for distribution in Hong Kong. Additional customer due diligence measures should be undertaken for third-party distributors (as outlined in the AML Guideline) and any third-party distribution arrangement should be notified in advance to the HKMA.

Can specified stablecoins be offered to retail investors?

Only specified stablecoins issued by Stablecoin Licensees can be offered to retail investors.

Those issued by entities that are not required to be Stablecoin Licensees (e.g. a non-HKD issuance outside Hong Kong which is not being actively marketed to the Hong Kong public) can be offered to professional investors[6] but not retail investors. In the future, Hong Kong may consider retail access under a passporting or similar arrangement to recognise non-HKMA licensed issuances outside Hong Kong that is subject to equivalent regulation.

Other consumer protection measures

There are restrictions relating to advertising regulated stablecoin activities and advertising the offering of specified stablecoins. It is an offence to publish (including posting on social media) an advertisement in which:

1. an unlicensed entity holds themselves out as carrying on a regulated stablecoin activity (such as issuing a specified stablecoin in Hong Kong or a HKD-referenced stablecoin); or
2. a non-permitted offeror holds themselves out as offering a specified stablecoin in Hong Kong.

Next steps

The regime comes into effect on 1 August 2025.

For pre-existing issuers (i.e. those who have carried on regulated stablecoin activity in Hong Kong prior to 1 August 2025), there is a transitional arrangement allowing operations to continue for a six-month grace period, provided certain conditions are met.[7] The conditions include the submission of a Stablecoin Licence application within the first three months of the commencement date. The applicant must be a Hong Kong company unless it is an authorized institution. Pre-existing issuers that do not submit an application within the first three months will trigger a one-month closing down period, during which regulated stablecoin activity can be conducted only for the purpose of closing down the business.

We are advising a leading global financial institution group in relation to its application for a Stablecoin Licence. We would be happy to help you navigate the new regime. Please contact Vincent Chan or your usual Slaughter and May contact.