Hong Kong Enacts Stablecoin Ordinance, Begins License Processing

Hong Kong activates its Stablecoin Ordinance, starts license reviews, and advances crypto regulation, tax transparency, and financial market reforms.

Hong Kong has officially enacted its Stablecoin Ordinance, marking a major regulatory milestone. Authorities said that license applications are now being reviewed. The move comes as Hong Kong ramps up oversight during rapid growth in the virtual assets market.

Hong Kong Launches Stablecoin Licensing and Crypto Oversight Framework

The Stablecoin Ordinance is regulated by the Hong Kong Monetary Authority. This applies to locally-operating issuers, as well as issuers that issue Hong Kong dollar-referenced stablecoins on a global scale. Therefore, compliance obligations now reach beyond the domestic borders.

Under the regime, stablecoins must have 100% reserve backing at all times. Some approved reserves are short-term bank deposits and government debt securities. This requirement is to improve price stability and investor protection.

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In addition, issuers are required to separate reserve assets from company holdings. Assets must be held on trust so that they can be protected for users in the event of insolvency. As a result, consumer protections have been formally increased.

Licensees also have to guarantee redemption at par value. Stablecoin holders are able to redeem without unreasonable fees or conditions. This rule helps to be confident in times of market stress.

For the financial strength, non-authorized institutions must have HK$25M in paid-up capital. Applicants are also required to have a physical presence in Hong Kong. These measures include strengthening accountability and local supervision.

Strict AML and CFT compliance is mandatory for all licensees. Authorities stressed conforming to international standards of financial crime. For this reason, enforcement expectations are much higher.

An application window for existing issuers ended in September 2025. No issuers met the requirement for transitional operation status. The HKMA is currently considering first-round applications.

Regulators are expected to start granting stablecoin licenses in Q1 of 2026. The process was cautious but efficient, officials said. Market participants continue to be attentive to regulatory clarity.

Hong Kong Advances Fintech, Tax Transparency, and Market Reforms

Beyond stablecoins, Hong Kong aims for broader crypto legislation this year. The government will submit frameworks for trading, custody, advisory, and asset management services. These proposals are to go before the Legislative Council.

Authorities also confirmed plans for crypto tax transparency. Automatic exchange of cross-border crypto tax data is scheduled to happen in 2028. The initiative is compatible with the reporting standards of the Organization for Economic Cooperation and Development (OEC).

The reforms are associated with China’s 15th Five-Year Plan. Officials vowed to be consistent with national development strategies. Hong Kong seeks to strengthen the global financial center.

Meanwhile, stock market reforms are a priority. Plans are to optimize listing rules and bring the settlement cycles down to T+1. Officials are also looking to attract mainland and overseas listings.

Hong Kong is also beefing up its asset and wealth management role. Legislative proposals regarding tax incentives for funds and family offices are planned. Rules to reorganize REITs will also be clarified.

In the bond markets, regulators published a fixed-income development roadmap. A feasibility study for an electronic bond trading platform is in progress. This could increase the efficiency of the markets.

Fintech growth is still at the core of policy planning. Stablecoin licensing is one of the main pillars of this strategy. Authorities try to strike a balance between innovation and regulatory clarity.

Overall, the Stablecoin Ordinance is a sign of regulatory maturity. Hong Kong keeps positioning itself as a trusted digital finance center. Authorities assured continued transparency and industry involvement.

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