How Hong Kong’s Stablecoin Law Challenges US Regulatory Dominance

Policy Context

In late May 2025, Hong Kong’s Legislative Council passed the Stablecoin Licensing Act, marking a pivot from cautious tolerance to active promotion of digital assets. Under the new rules, any entity that issues or operates a stablecoin pegged to fiat must secure an SFC license by January 1, 2026. This contrasts sharply with the U.S., where the SEC and CFTC remain in a tug-of-war over jurisdiction, leaving issuers awaiting guidance.

Financial Secretary Paul Chan framed the law as essential to “reinforce Hong Kong’s status as Asia’s fintech hub.” The mandate includes capital requirements of HK$10 million (about US$1.3 million) and monthly reserve audits—measures intended to ensure solvency and transparency. By comparison, U.S. stablecoin issuers navigate a patchwork of state money-transmitter licenses and fragmented federal oversight.

Key Regulatory Differences

• Unified Licensing vs. Fragmented Oversight: Hong Kong places stablecoins squarely under the SFC’s umbrella, whereas in the U.S. issuers juggle FinCEN, SEC, CFTC, and state regulators.
• Reserve Audits: Hong Kong’s monthly third-party attestations contrast with the voluntary monthly reports that U.S. issuers publish, often without standardized methodology.
• Capital Buffers: The SFC can impose extra capital requirements if an issuer’s market cap exceeds HK$1 billion. U.S. regulators have yet to set a clear floor for fiat-backed reserves.
• Consumer Protections: Clear redemption and fee-disclosure rules in Hong Kong offer retail users legal recourse, while U.S. protections depend on each issuer’s terms of service.

These distinctions create a powerful value proposition. Issuers gain regulatory certainty and an efficient path to market, reducing months of legal reviews and application hurdles common in the States.

Industry Shift to Hong Kong

Already, major players are circling. Circle’s USDC arm has applied for a Hong Kong license, complementing its U.S. charter and MiCA filings in Europe. Paxos executives, speaking off the record, say they’re “accelerating” plans to move part of their issuance team to Hong Kong for faster approval cycles.

Smaller startups are also taking note. StableHub, a Singapore-based issuer, announced its intent to back-track applications in the U.S. and focus on Hong Kong’s timeline, which guarantees a decision within 90 days of submission. Local bankers estimate at least US$3 billion of new issuance could flow through Hong Kong in 2026 alone.

Challenges for U.S. Regulators

The clear, one-stop-shop approach in Hong Kong places pressure on U.S. agencies to harmonize rules. Industry groups like the Digital Dollar Project have called for a federal stablecoin framework, but partisan gridlock has stalled progress. Meanwhile, private issuers face unpredictable enforcement actions—as seen in the SEC’s suit against unregistered offerings—and circuit court splits over token classification.

“If America wants to retain innovation leadership, we cannot let bureaucratic friction drive projects offshore,” warns Rep. Patrick McHenry, a vocal crypto advocate. The longer U.S. waits, the more ground it cedes to jurisdictions offering speed and certainty.

Looking Ahead

With applications opening July 1, 2025, the race is on. Hong Kong aims to license its first cohort by October, setting the stage for regulated stablecoins at scale. The U.S. must answer whether it will reform its fragmented regime or lose issuers—and the economic activity they generate—to Hong Kong and Europe.

As global adoption accelerates, stablecoins will underpin cross-border payments, tokenized securities, and programmable commerce. Whoever gets the rules right first stands to write the playbook for digital finance in the decade ahead.