Hong Kong's 2025 Stablecoin Regulatory Landscape : From Transition to Long-Term Stability【An Interpretive and Action Guide】
- Dr Frederick Wong
- Jul 31
- 4 min read
I. Why Should You Read This Article?
On August 1, 2025, the Stablecoin Ordinance (Cap. 656) will officially come into effect, elevating Hong Kong to become the world's first jurisdiction to launch a comprehensive licensing, anti-money laundering (AML), technology risk, reserve asset, and exit mechanism framework for "fiat-referenced stablecoins."
For institutions already operating in Hong Kong or those preparing to apply for a license, only the final three months of the "transitional arrangements" remain (submission deadline: October 31, 2025). Following this, a new normal will commence, with a dual track of a "winding-down period" or a "provisional license."
This article consolidates four major official documents (see Appendix) in Traditional Chinese, focusing on the two key dimensions of "Practical Compliance" and "Future Strategy" to help you gain a comprehensive understanding in a single read.
II. Regulatory Timeline at a Glance
Date | Milestone | Key Points |
2025/8/1 | Ordinance Takes Effect | Unlicensed entities are prohibited from issuing, promoting, or representing themselves as engaging in stablecoin business. |
2025/10/31 | Transitional Application Deadline | Existing issuers must submit a complete application, a written declaration, and a letter of undertaking. |
2026/1/31 | Last Day of Provisional License | Provisionally licensed entities may continue operations; unlicensed entities will enter a one-month winding-down period (extendable). |
Ongoing | Post-Licensing Obligations | Weekly reserve disclosures, daily reconciliations, annual audits, real-time Travel Rule compliance, and quarterly stress testing. |
III. 5 Deep Dive Areas of License Application
1. Reserve Assets: 1:1 Full Backing
Must be "high-quality and high-liquidity": cash, bank deposits with a tenor of 3 months or less, sovereign debt with a tenor of 1 year or less, and overnight reverse repos.
Tokenized versions are permissible but must demonstrate an equivalent risk level.
Multi-currency mismatches may be acceptable, but require prior application to the Hong Kong Monetary Authority (HKMA) and a demonstration that the 1:1 backing can be maintained under stress scenarios.
2. Asset Segregation and Trust Structure
Reserve assets must be segregated from the issuer's own assets. A "declaration of trust" or an "independent trustee" structure is recommended.
The trust deed must first obtain an independent legal opinion and be filed with the HKMA; any material changes require resubmission.
3. Redemption Rights and Timeline
Coin holders must be able to redeem their stablecoins at par value within one business day, without unreasonable fees.
If redemptions are temporarily frozen for compliance reasons (e.g., money laundering, sanctions), the 100% reserve must still be maintained, with redemption obligations to be fulfilled immediately upon unfreezing.
4. Travel Rule & Wallet Risk Control
On-chain transfers of HK$8,000 or more must carry complete information for both the "originator" and the "beneficiary."
A "risk-based approach" with enhanced measures must be applied to "unhosted wallets," including address screening, transaction limits, and identity re-verification.
When partnering with third-party distributors, they must be treated as "customers" for KYC/AML purposes and be subject to ongoing monitoring.
5. Technology and Operational Resilience
Every change to a smart contract must be re-audited; critical private keys must be kept "offline, with multi-signature controls, and in a segregated environment."
Establish three lines of defense: business units, risk control/compliance, and internal audit. Conduct quarterly stress tests and report findings to the board of directors.
Implement an incident classification system: liquidity runs, technical failures, de-pegging events, and public relations crises. Drills must be conducted to ensure the recovery of critical functions within 24 hours.
IV. Transitional Period Strategy: 3 Steps for Existing Issuers
1. Immediate Action Checklist
Review whether you have conducted "substantive operations" of a stablecoin in Hong Kong over the past 12 months (not just a shell company).
Conduct a gap analysis of your reserves, internal controls, personnel, and technology; calculate the required capital and time to achieve compliance.
2. Submission Strategy
Engage in informal consultations with the HKMA's "Licensing Team" first to identify gaps in your documentation (refer to Appendix B for a list of 29 items).
Simultaneously, prepare a case for a "provisional license" by demonstrating a "reasonable prospect of being able to show that the minimum criteria are met."
3. Risk Scenario Drills
Rejection: Immediately enter the winding-down period, during which only activities for an orderly business cessation are permitted. A redemption notice and an asset disposal plan must be drafted in advance.
Receiving a Provisional License: You will be regulated to the "same standard as a licensed person." Budget for additional compliance costs (audits, systems, personnel).
V. Long-term Perspective: The Chessboard Beyond Hong Kong
Mutual Recognition: The HKMA has indicated that it may explore mutual recognition with jurisdictions that have a "comparable framework" in the future but emphasizes that this "will not substitute for local obligations."
Systemically Important Stablecoins: International standards (from BIS, FATF) are still evolving. If a stablecoin is later designated as "systemically important," it will face higher capital and liquidity requirements.
Business Model Extension: Licensed issuers wishing to issue multi-currency stablecoins or engage in "other business activities" must obtain additional written consent from the HKMA and prove that the associated risks are manageable.
VI. Conclusion: Compliance is Not a Cost, but a Necessary Moat
Through a design of "strict entry, accommodative operation," Hong Kong is elevating stablecoins from "grey-area innovation" to "regulated financial infrastructure."
For businesses, this requires a short-term investment of resources to meet licensing requirements. In the long term, it grants them the "Hong Kong brand," providing access to compliant markets in Asia and globally.
Advanced Recommendation: "Cross-functional task forces" that FOFA partners can initiate immediately:
Legal (for legal professionals): Review trust deeds, and terms and conditions.
Finance (for finance professionals): Build reserve valuation and liquidity models.
Technology (for technology enterprises): Implement on-chain monitoring and Travel Rule solutions.
Compliance (for legal professionals): Conduct a gap analysis against Appendices A/B and design a 90-day sprint plan.
By closely following the association's latest event updates and completing the courses before Q4 2025, you can catch the first wave of official licenses and seize a first-mover advantage in the market :
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Appendix: Four Official Documents
《Consultation conclusions on the Guideline on Supervision of Licensed Stablecoin Issuers》
《Consultation conclusions on the Guideline on Anti-Money Laundering and Counter-Financing of Terrorism (For Licensed Stablecoin Issuers)》
《Explanatory Note on Licensing of Stablecoin Issuers》
《Explanatory Note on Transitional Provisions for Pre-existing Stablecoin Issuers》
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