Following the enactment of stablecoin legislation, Hong Kong engages in discussions over rule-making procedures
Hong Kong has enacted legislation supporting the issuance of stablecoins, effective August 1, 2025. The new regulation sets strict reserve, anti-money laundering (AML), and capital requirements for stablecoin issuers in the region.
The Hong Kong Monetary Authority (HKMA) has published two consultation documents outlining the draft guidelines for stablecoin issuers and AML procedures. According to the new regulation, stablecoin issuers in Hong Kong must obtain a license from the HKMA if they issue fiat-referenced stablecoins in Hong Kong or stablecoins pegged to the Hong Kong dollar.
Reserve Requirements
Stablecoins must be 100% backed by high-quality, liquid assets such as cash or short-term government securities. These reserve assets must be segregated under custody in an effective trust arrangement with a licensed bank or qualified custodian approved by HKMA. Rehypothecation of these assets is prohibited. Reserves must match the referenced asset of the stablecoin, with HKMA allowing case-by-case flexibility.
Anti-Money Laundering (AML) and Know-Your-Customer (KYC)
Issuers must conduct real-name verification of all stablecoin holders and retain user identification records for over five years. The use of anonymous wallets and integration with decentralized finance (DeFi) protocols is explicitly banned for compliant stablecoins. Marketing unlicensed stablecoins is prohibited, with penalties including fines and criminal liability.
Capital Requirements
Issuers must have a minimum paid-up share capital of HKD 25 million, maintain financial resources sufficient to meet obligations as they fall due, and have dedicated resources to carry out licensed stablecoin activities. They must operate a sound, viable business plan with realistic demand forecasts and cannot pay interest or interest-like incentives to stablecoin holders; any income or loss from reserve management belongs to the issuer.
Ongoing Compliance and Reporting
On a daily basis, stablecoin issuers in Hong Kong are required to publish figures about the issuance and reserves and report to the regulator on a weekly basis. Regular attestations and audits are required for stablecoin issuers, but the frequency is up to the HKMA's discretion.
Due Diligence and Transactions
Stablecoin issuers are expected to perform due diligence on frequent counterparties or individuals conducting occasional transactions involving an amount equal to or above $8,000. The rule for currency backing in stablecoins is relaxed for the Hong Kong Dollar (HKD) given its peg to the US dollar, allowing US dollar assets for a HKD stablecoin.
Operational Transparency and Approved Activities
Stablecoin issuers in Hong Kong must operate with operational transparency and are subject to AML procedures as outlined in the draft guidelines published by the HKMA. The HKMA has the latitude to approve other types of assets for the reserves that back a stablecoin. Stablecoin issuers in Hong Kong are also allowed to engage in other business activities, but these activities must be approved first.
Responses to the consultation are required by the end of June. The HKMA requires additional due diligence on self-hosted wallets for stablecoin holders, and issuers are not allowed to pay interest to stablecoin holders, but marketing incentives are expressly allowed.
The new regulation establishes a comprehensive framework emphasizing full reserve backing, stringent customer identity verification, robust capital standards, and operational transparency to ensure stablecoin issuance aligns with financial stability and AML considerations. The licensing regime is overseen by the HKMA, with enforcement beginning August 1, 2025.
- The Hong Kong Monetary Authority (HKMA) requires stablecoin issuers in Hong Kong to have a minimum paid-up share capital of HKD 25 million and maintain financial resources sufficient to meet obligations as they fall due, as stated in the capital requirements.
- According to the new regulation, stablecoin holders in Hong Kong must undergo real-name verification and retain user identification records for over five years, as part of the Anti-Money Laundering (AML) and Know-Your-Customer (KYC) measures.
- Stablecoins in Hong Kong must be 100% backed by high-quality, liquid assets such as cash or short-term government securities, with reserves matching the referenced asset of the stablecoin, as explained in the Reserve Requirements.
- The Hong Kong Monetary Authority (HKMA) has published guidelines outlining AML procedures for stablecoin issuers, including the prohibition of anonymous wallets and decentralized finance (DeFi) protocols for compliant stablecoins, as per the Anti-Money Laundering (AML) and Know-Your-Customer (KYC) regulations.
