Hong Kong’s stablecoin regulations pose a challenge to the dominance of the US dollar by introducing a multi-currency approach
- Hong Kong enforces a stablecoin regulatory framework from August 1, 2025, requiring licensing, 100% reserve backing, and strict AML/CFT compliance under its LEAP framework. - The law mandates HKMA oversight, minimum capital of HKD 25 million, and segregated reserves, favoring institutional players like Standard Chartered and Animoca Brands. - Unlike the U.S. GENIUS Act, Hong Kong allows multi-currency stablecoins (including offshore RMB), supporting BRI trade and challenging dollar hegemony through lower
Hong Kong has rolled out an extensive regulatory system for fiat-backed stablecoins, aiming to establish itself as a leader in digital finance while tackling issues of financial security and consumer safety. Starting August 1, 2025, the Stablecoins Ordinance will require all issuers of fiat-referenced stablecoins operating in or targeting Hong Kong to be licensed, maintain specific reserves, and comply with anti-money laundering (AML) and counter-terrorist financing (CFT) protocols. This legislation, part of the broader LEAP (Licensing, Education, Application, Protection) initiative, seeks to foster innovation under strict regulatory supervision, mirroring China’s cautious stance on crypto oversight.
According to the Ordinance, stablecoin providers must secure a license from the Hong Kong Monetary Authority (HKMA). Core obligations include holding at least HKD 25 million (about USD 3.2 million) in paid-up share capital and ensuring stablecoins are fully backed by high-quality liquid assets like cash or short-term government bonds. These reserves must be kept separate from company funds and protected from creditors, with additional collateral strongly recommended. Governance rules require strong internal controls, independent risk committees, and clear, transparent reporting for token holders.
Compliance with AML and CFT standards is central to the new rules. Issuers are obligated to implement Know-Your-Customer (KYC) checks for every stablecoin user, regardless of wallet type, and undergo regular independent audits. The HKMA has been given wide-ranging enforcement authority, including the ability to impose fines up to HKD 5 million (USD 640,000) and prison sentences of up to seven years for breaches. Ongoing violations incur daily fines of HKD 100,000. These strict measures have drawn criticism from cryptocurrency supporters, who claim that KYC rules threaten privacy and decentralization.
The Ordinance grants a six-month transition period for current stablecoin projects to meet the new standards, with unlicensed operations facing criminal charges after October 1, 2025. Transitional measures allow for temporary licenses for applicants showing compliance progress, valid until January 31, 2026. The HKMA has indicated it will be selective in granting licenses, favoring well-funded organizations with strong compliance systems. This approach benefits large institutions such as Standard Chartered, Animoca Brands, and HKT, which have formed a joint venture—Anchorpoint Financial—to seek a stablecoin license.
Hong Kong’s regulatory stance differs from the U.S. GENIUS Act, signed by President Trump on July 18, 2025. While both require licensing and full reserve backing, the U.S. law prioritizes the dollar by insisting reserves be held in U.S. Treasuries or cash. The GENIUS Act also limits major non-financial companies from controlling leading stablecoin issuers, aiming to curb Big Tech’s influence. In contrast, Hong Kong permits stablecoins tied to any official currency, including offshore RMB, making it more attractive as a regional center for the Belt and Road Initiative (BRI).
These regulatory choices carry significant geopolitical weight. The U.S. model strengthens the dollar’s dominance by linking stablecoin reserves to U.S. government debt, indirectly supporting federal borrowing. Meanwhile, Hong Kong’s multi-currency policy aligns with China’s BRI by enabling cross-border transactions in HKD, USD, or offshore RMB. For instance, settling a $10 million trade with HKD-pegged stablecoins could cut transaction fees by 5–7%, benefiting BRI trade routes in Asia and Africa. This positions Hong Kong as a connector between China and emerging markets, promoting digital finance in areas where trust in local banks is low.
The market response has been varied. Interest from major banks and crypto companies in Hong Kong’s framework is increasing as they prepare for compliance. However, smaller issuers may struggle with the high capital and operational demands. Some critics argue the rules favor established players and could hinder innovation, while supporters believe Hong Kong could set a global standard for stablecoin regulation, rivaling Singapore and the UAE.
The first batch of stablecoin licenses is anticipated in early 2026, with initial applications likely centered on B2B uses such as trade finance and corporate treasury management. If successful, Hong Kong’s model could reshape the fintech sector in Asia, striking a balance between innovation and regulatory discipline.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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