Detailed requirements for the regulation of stablecoin issuers in Hong Kong

On May 30, 2025, the Government of the Hong Kong Special Administrative Region published the "Stablecoin Ordinance" in the Gazette. This ordinance establishes a licensing system for fiat stablecoin issuers and sets forth a series of detailed regulatory requirements for stablecoin issuers. The specifics are as follows:

- Application subject requirements: The issuer must apply for a license from the Hong Kong Monetary Authority, and applicants are limited to companies or recognized institutions outside of Hong Kong.

- Reserve management requirements: Stablecoins must be pegged to fiat currency at a 1:1 ratio, with reserve assets fully covered and audited regularly. Each type of stablecoin must have an independent reserve asset portfolio, and the market value must not be less than the par value of stablecoins that have not yet been redeemed and are still in circulation. Reserve assets must be consistent with the assets to which the stablecoin is pegged, and should be of high quality, high liquidity, and carry minimal investment risk. Licensees must also fully and timely disclose reserve asset management policies, risk assessments, asset composition, and market value to the public.

- Consumer protection requirements: Licensees must grant users a mandatory, unconditional redemption right, ensuring that users can redeem at face value at any time without imposing cumbersome conditions and unreasonable fees. Additionally, the redemption procedures, timelines, conditions, or fees must be clearly disclosed.

- Management requirements: Licensees must appoint a Chief Executive Officer, directors, and a stablecoin manager, and these individuals must be approved by the Hong Kong Monetary Authority.

- Anti-money laundering requirements: Compliance with the Hong Kong "Anti-Money Laundering Ordinance" is required, including real-name authentication and reporting of suspicious transactions.

- Sales entity restrictions: Only designated licensed institutions are allowed to sell fiat stablecoins in Hong Kong, and only fiat stablecoins issued by licensed issuers can be sold to retail investors. Designated licensed institutions include stablecoin issuers licensed by the Financial Secretary, banks, institutions holding a Type 1 license (securities trading) issued by the Hong Kong Securities and Futures Commission, and virtual asset trading platforms licensed in Hong Kong.

- Penalties for violations: Engaging in regulated activities without a license or conducting false advertising is a criminal offense, which may lead to fines and imprisonment. Activities conducted without a license, such as sales by unlicensed providers, can result in a conviction through public prosecution, with penalties of up to 5 million HKD in fines and 7 years of imprisonment; fraudulent activities can incur fines of up to 10 million HKD and 10 years of imprisonment.