Hong Kong enacts laws governing digital currencies (stablecoins)

In a significant development for the digital currency world, the GENIUS Act has passed a procedural vote in the United States, marking progress towards stablecoin legislation. Across the Pacific, Hong Kong is also making strides in its regulatory framework for stablecoins.

Hong Kong's Stablecoins Ordinance, effective from August 1, 2025, mandates that any issuer of fiat-referenced stablecoins (FRS) linked to the Hong Kong dollar, whether domestic or foreign, must obtain a license from the Hong Kong Monetary Authority (HKMA). The ordinance defines stablecoins as cryptographically secured digital assets that serve as a unit of account, medium of exchange, and store of value, operated on distributed ledgers, and maintaining stable value by reference to one or a basket of assets.

The regulatory regime imposes stringent financial and operational standards to ensure transparency, reserve asset backing, robust risk controls, and consumer protection. Issuers must maintain a minimum paid-up capital of HK$25 million, manage high-quality liquid reserve assets segregated from other assets, and guarantee redemption requests at par value without undue conditions. The HKMA has authority to specify additional regulated stablecoin activities and will implement anti-money laundering (AML) compliance rules and transitional provisions for operators already in the market.

ZA Bank has welcomed the passage of the Stablecoin Bill and is positioning itself as a provider of reserve banking services. Other players, such as Standard Chartered, JINGDONG Coinlink Technology (a subsidiary of China's e-commerce giant JD.com), and startup RD Innotech (backed by ZA Bank and regulated crypto exchange HashKey) are already members of the HKMA's stablecoin sandbox.

The legal requirements for reserve assets backing a stablecoin in Hong Kong are relatively loose, requiring them to be in the same currency, of high quality, high liquidity, and minimal investment risks. A joint venture between Standard Chartered Bank Hong Kong, Hong Kong Telecom (HKT), and web3 firm Animoca Brands has been created to launch a stablecoin.

The Stablecoin Bill for fiat-referenced stablecoins has been passed by Hong Kong's Legislative Council, and the draft bill delegates important rulemaking to the HKMA. Extensive penalties will be imposed on unregulated entities that market stablecoins in Hong Kong. The Stablecoin Bill is seen as a key pillar in Hong Kong's desire to maintain and enhance its position as an international financial center.

Meanwhile, in the United States, the passage of the GENIUS Act marks a significant step towards establishing a clear regulatory framework for stablecoins. The details of the legislation are yet to be finalized, but it is expected to provide a path for stablecoin issuers to operate within a compliant environment.

The HKMA's CEO, Mr Eddie Yue, stated that the Ordinance has established a risk-based, pragmatic, and flexible regulatory regime. The progress in both the United States and Hong Kong underscores the growing importance of stablecoins in the global financial landscape and the need for clear, effective regulation.

The passage of the Stablecoins Ordinance in Hong Kong mandates that any issuer of fiat-referenced stablecoins (FRS) must obtain a license from the Hong Kong Monetary Authority (HKMA), effective from August 1, 2025.
Issuers of stablecoins in Hong Kong must maintain a minimum paid-up capital of HK$25 million, manage high-quality liquid reserve assets, and guarantee redemption requests at par value without undue conditions.
ZA Bank is positioning itself as a provider of reserve banking services in the newly regulated stablecoin market, while other players, including Standard Chartered, JINGDONG Coinlink Technology, and RD Innotech, are already members of the HKMA's stablecoin sandbox.
In the United States, the GENIUS Act, which passed a procedural vote, marks a significant step towards establishing a clear regulatory framework for stablecoins, though details are yet to be finalized.
The regulatory regime in Hong Kong imposes stringent financial and operational standards, including transparency, reserve asset backing, robust risk controls, and consumer protection.
The Stablecoin Bill passed in Hong Kong is seen as a key pillar in its desire to maintain and enhance its position as an international financial center, while the progress in both the United States and Hong Kong underscores the growing importance of stablecoins in the global financial landscape and the need for clear, effective regulation in the retail, banking, finance, business, and fintech sectors, with implications for anti-money laundering (AML) compliance and legal proceedings.