Hong Kong Approves Landmark Stablecoin Licensing Bill for Issuers

Background & Context

Late on May 21, Hong Kong’s Legislative Council passed the Stablecoin Licensing Bill in a decisive 34–11 vote. The law mandates that any entity issuing or offering stablecoins must obtain a license from the Securities and Futures Commission (SFC) by January 1, 2026. It’s the first piece of legislation in Asia-Pacific to treat stablecoins—pegged digital tokens—as a regulated financial instrument, rather than a commodity or e-money alternative.

This initiative comes amid global deliberations over digital currencies. While the EU’s Markets in Crypto-Assets Regulation (MiCA) edges closer to enforcement, Hong Kong’s framework prioritizes a streamlined application process and sets capital requirements at HK$10 million (≈US$1.3 million) to ensure issuer solvency. Financial Secretary Paul Chan hailed the move as “vital for maintaining Hong Kong’s edge as Asia’s fintech hub.”

Key Provisions

Under the new law, stablecoin issuers must meet stringent requirements:

• Minimum Capital: HK$10 million in liquid assets, updated quarterly.
• Reserves Audit: Monthly third-party attestation of 100% backing in fiat or equivalent assets.
• Operational Safeguards: Disaster recovery plans, cybersecurity audits, and business continuity protocols.
• Investor Protections: Clear redemption policies, transparent fee disclosures, and guardrails against market manipulation.

Importantly, the SFC will have discretion to impose additional capital buffers if an issuer’s token exceeds HK$1 billion in market cap—currently the threshold met by just three projects: HKDC, Tether HKD, and a pilot e-HKD from the HKMA.

Market Reaction

Traders and institutions responded swiftly. On OKX’s Hong Kong order book, stablecoin pairs saw a 25% surge in volume within two hours of the bill’s passage. HKDC, pegged 1:1 to the Hong Kong dollar, topped HK$200 million in 24-hour trading volume—a sixfold jump from its average.

Asset managers in the region are recalibrating. FinEdge Capital, a local quant shop, announced plans to add up to 5% allocation in regulated stablecoins to hedge broader Asia ex-Japan equity positions. “We view this as a watershed moment,” said CEO Sandra Liu. “Regulated stablecoins will become integral to cross-border settlements and institutional treasury strategies.”

Smaller issuers lament the compliance cost. Sunny Lai, founder of a tokenization startup, noted: “The upfront HK$10 million barrier and ongoing audit fees could squeeze emerging projects.” Yet many anticipate partnerships or acquisitions by larger financial conglomerates to navigate these hurdles.

Regulatory Impact

Industry observers see this bill as a template for other APAC jurisdictions. Singapore’s MAS, which currently treats stablecoins under the Payment Services Act, is reviewing similar licensing schemes. Meanwhile, U.S. regulators have yet to finalize guidance—leaving Binance USD, Tether, and Paxos in a state of limbo for institutional clients.

“Hong Kong’s clarity gives firms the certainty they crave,” says CryptoCompliance’s Sophia Li. “A robust yet pragmatic approach will spur innovation, not stifle it.” The SFC, in turn, plans quarterly public updates on license applications—a transparency move praised by governance advocates.

Looking Ahead

As the industry digests the details, attention turns to the SFC’s licensing roadmap. Initial applications open on July 1, 2025, and successful issuers could launch regulated stablecoins by year-end. Observers predict that by Q2 2026, up to 10 licensed tokens will circulate, representing HK$5 billion in combined market cap.

For corporates, this opens corridors for faster cross-border payments, reduced FX friction, and programmable finance use cases. Retail users stand to benefit from insured redemptions and greater transparency. Yet, the ultimate test will be real-world adoption—will merchants and institutions embrace these new tokens?

Hong Kong’s stablecoin licensing bill may well define Asia’s digital asset landscape for years to come. It balances the twin imperatives of safety and innovation, and it sends a clear signal: regulated digital currencies are no longer a distant concept, but a foundational pillar of tomorrow’s financial system.