New law establishes licensing regime for fiat-referenced stablecoins
Hong Kong has passed a landmark bill establishing a licensing regime for fiat-referenced stablecoin issuers, marking a significant expansion of its virtual asset regulatory framework. The move positions the territory as a key hub in the global race to legitimise digital assets amid surging institutional demand and rising Bitcoin prices.
The Stablecoins Bill, passed on 21 May by the Legislative Council, will require any person issuing a fiat-referenced stablecoin (FRS) in or from Hong Kong—or referencing the Hong Kong dollar in any jurisdiction—to obtain a licence from the Hong Kong Monetary Authority (HKMA).
Under the new law, licensees must:
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Maintain full reserve backing for each stablecoin in circulation, with reserve assets matching the par value of liabilities.
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Process redemptions at par value under reasonable conditions.
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Segregate client assets and maintain robust risk management systems.
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Comply with anti-money laundering and counter-terrorist financing obligations.
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Meet minimum capital thresholds of HK$25 million.
Only licensed institutions will be permitted to offer FRS products in Hong Kong, and only those issued by licensed entities may be marketed to retail investors. The legislation also prohibits advertising unlicensed FRS offerings, including during the initial six-month transition period.
The bill grants the HKMA wide-ranging rulemaking powers, including the ability to designate foreign stablecoin entities as “designated stablecoin entities” if their operations are deemed material to Hong Kong’s financial stability. These entities must comply with requirements on financial resources, reserve management, risk controls, and compliance monitoring.
Christopher Hui, Secretary for Financial Services and the Treasury, said the new law adheres to the “same activity, same risks, same regulation” principle and supports Hong Kong’s ambitions to be a leading international financial centre. HKMA Chief Executive Eddie Yue added that the regime is “risk-based, pragmatic, and flexible,” laying a foundation for the healthy and sustainable development of the digital asset ecosystem.
Part of a broader global trend
The bill’s passage comes as governments worldwide move to regulate stablecoins, with the European Union, Singapore, UAE, and Japan already implementing frameworks. In the United States, the GENIUS Act has advanced in the Senate and could establish the first federal rules for stablecoin issuers if enacted.
According to Chainalysis, stablecoins now represent a market capitalisation of around US$232 billion and are widely seen as a backbone of the crypto ecosystem due to their use in trading, payments, and remittances.
Chengyi Ong, Asia-Pacific policy head at Chainalysis, said the law will likely boost adoption and legitimacy by addressing financial frictions in traditional systems—particularly cross-border payments.
Market context: Bitcoin hits fresh highs
The legislative breakthrough coincides with a new all-time high for Bitcoin, which climbed past US$111,000 on Thursday. The rally—fueled by institutional buying, ETF inflows, and regulatory momentum—reflects a growing perception of Bitcoin as a hedge amid geopolitical tensions and weakening confidence in sovereign debt.
Bitcoin’s gains also follow the passage of crypto-friendly policies in the US and moves by major public companies and sovereign wealth funds to increase their holdings. Digital asset managers report record inflows, with some analysts projecting Bitcoin could reach between US$160,000 and US$200,000 later this year.
The HKMA will conduct further consultations on the detailed implementation of the licensing regime, which is expected to take effect later this year. A transitional period will be granted to allow market participants to adjust to the new rules.
