On May 21, 2025, Hong Kong’s Legislative Council passed the Stablecoins Bill, establishing a regulatory framework for stablecoins–cryptocurrencies whose value is tied to an external asset or commodity. This marks an important step in positioning Hong Kong as a progressive hub for digital finance. The legislation introduces a licensing regime for fiat-referenced stablecoin (FRS) issuers and strengthens the city’s broader regulatory approach to virtual asset (VA) activities. It aims to enhance market integrity, consumer protection, and financial stability.
Key Provisions of the Bill
Under the new regime, any person who, in the course of business, issues an FRS in Hong Kong, or issues an FRS that purports to maintain a stable value by reference to the Hong Kong dollar (whether in or outside Hong Kong), must obtain a licence from the Hong Kong Monetary Authority (HKMA).
Licensed issuers will be required to meet high regulatory standards, including:
- Proper segregation of client assets;
- A sound and transparent stabilisation mechanism; and
- The ability to redeem stablecoins at par value on reasonable terms.
In addition, issuers must comply with existing obligations on anti-money laundering and counter-terrorist financing, risk management, disclosure, and auditing–promoting greater transparency and trust in the ecosystem.
Retail investors may only be offered FRS issued by licensed entities (specified licensed institutions), and issuers must provide clear and transparent information on the asset backing of their stablecoins.
The HKMA will have oversight of the new framework, including powers to issue, suspend or revoke licences, appoint statutory managers, conduct investigations, and impose sanctions. Aggrieved parties may apply to the Stablecoin Review Tribunal for a review of decisions under the Ordinance, with a further right of appeal to the Hong Kong Court of Appeal.
Implications for Stakeholders
Stablecoin issuers will need to prepare for the licensing process and ensure their operations meet the new regulatory standards. This may involve significant investment in compliance, legal, and technology infrastructure.
Financial institutions should consider the impact of the framework on their existing services and evaluate potential opportunities for collaboration with licensed stablecoin issuers, including the development of innovative financial products.
For investors and consumers, the introduction of a clear regulatory regime provides greater security and confidence in engaging with stablecoins.
Looking Ahead
The Stablecoins Ordinance is expected to come into force later this year. Its passage marks a pivotal development in Hong Kong’s evolving financial landscape. By setting out a clear framework, Hong Kong continues to promote responsible innovation in the virtual asset space.
Stakeholders should remain engaged and consider how this new regime may affect their operations and investment strategies.
Seyfarth Shaw LLP provides this information as a service to clients and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship. Readers should not act upon this information without seeking advice from their professional advisers.