Hong Kong Monetary Authority temporarily does not issue new licenses: as stablecoin regulation shifts from "licensing" to "effectiveness testing"

Writing: RWA Research Institute

On April 10th, when the Hong Kong Monetary Authority granted two hefty stablecoin issuer licenses to DotPoint Financial Technology Limited and Hong Kong Shanghai HSBC Bank Limited, application materials from another 34 institutions waiting in the queue were neatly stacked on their desks. 36 applications, two licenses, with a rejection rate of 94.4%. This is not a story about “who won,” but rather an opening chapter about “how the rules are being redefined.”

However, the market enthusiasm did not bring the anticipated “second wave.” On May 4th, the HKMA Chief Executive Yu Weiwen’s statement after the Legislative Council Financial Services Committee meeting was like a cold splash of water. He said that after the first batch of stablecoins is launched, they will consider whether to issue new licenses, hoping for a “steady start” and gradual development. Even if more licenses are issued, it will be in limited numbers, depending on how much the market can accommodate in terms of issuers and new risks, emphasizing the importance of managing market expectations.

“Steady start.” These three words are worth dissecting for everyone paying attention to Hong Kong’s digital asset progress.

By 2026, when the total global stablecoin market surpasses $320 billion and penetrates the daily payments of hundreds of millions of users, regulators hold the key to license approval but have actively slowed down after issuing licenses. Behind this is a rewritten governance philosophy. If the core question of traditional financial licensing is “Are you qualified,” then Hong Kong’s new answer is—“Once you are operational, is this system still safe?”

1. From “Entry” to “Verification”

The core logic of traditional financial licensing is not complicated: strict qualification review before application, ongoing supervision after licensing. This entry-focused model has operated in mature financial sectors like banking, securities, and insurance for decades. Its implicit premise is that—business models are known, risk profiles are clear, and regulatory experience is rich.

But stablecoins clearly do not belong to this category.

They are new entities. International regulatory systems are still evolving, and there is no mature, replicable standard to reference. Under such circumstances, can a project’s full performance in the real market be predicted solely based on application materials and sandbox simulations? The answer is unlikely to be reassuring.

Thus, we see a subtle yet profound shift. The HKMA has moved the focus of review from the application stage to the actual operational performance after the product’s launch. Yu Weiwen clearly stated: they will first observe the implementation of the two stablecoins after launch, understand whether actual risks align with expectations, and optimize the regulatory process accordingly. This means that the first batch of licensed institutions actually play a dual role—they are market participants and also serve as “stress test samples” on a larger scale.

More notably, Deputy Chief Executive Chen Weimin disclosed specific regulatory measures. Since licensing, the authorities have maintained close contact with the two licensees, tracking not just compliance reports but whether the system itself meets standards, whether risk controls are in place, and whether staffing is sufficient.

If cross-border applications are involved, thresholds are further raised—they must obtain local regulatory approval, and some steps require third-party independent verification. This penetrative, verifiable, continuously dynamic regulatory density far exceeds the typical “annual report review of licensed institutions.”

This effectively extends the sandbox logic into the real market environment. However, the scale of testing has increased, the dimensions of observation have expanded, and the tolerance for errors has shrunk.

Stablecoin regulation fundamentally addresses a trust issue—and trust is never inherently granted by a license alone.

2. Interpreting the Three Core Dimensions of “Prudent Progress”

If “observation first, then licensing” is the superficial expression of the regulatory strategy, then understanding its core requires examining at least three interconnected dimensions.

Dimension One: Risk Isolation and Market Capacity Management

Yu Weiwen repeatedly emphasizes the keyword “market capacity.” Even if more licenses are issued in the future, the quantity will be strictly controlled, depending on how many issuers the market can accommodate and the different new risks involved.

This is intriguing because “market capacity” is rarely discussed in traditional financial licensing. Bank licenses consider capital adequacy, shareholder qualifications, and business plans, but seldom ask, “How many banks can this market hold?” However, the essence of stablecoins determines that their risk transmission pathways are entirely different from traditional financial products.

Does a stablecoin issuer’s reserve assets truly achieve 100% high liquidity coverage? Will their smart contracts remain unanchored under extreme market conditions? If large-scale redemptions occur in a short period, will liquidity pressures transmit through shared reserve assets into the traditional banking system? Any of these questions, if left unclarified before increasing the number of issuers, could amplify systemic risk exposure.

The HKMA’s logic is—rather than leaving problems for the market to “discover,” it’s better to limit issues within a controllable, observable scope. This is not hindering competition but a typical macroprudential management approach. Just as the human immune system does not deploy all antibodies at once when encountering a new pathogen but sends out a small part for “scouting” and “adaptation,” financial regulation also needs such an “immune response” process for new tools.

Dimension Two: The Complexity of Cross-Border Compliance Is Preemptively Considered

In Chen Weimin’s disclosed checklist for license preparation, a detail worth highlighting is: whether approval from the local regulator is required if cross-border applications are involved.

This is not a trivial addition.

Stablecoins are inherently borderless. A Hong Kong dollar stablecoin issued on Ethereum, in theory, can circulate among any user worldwide with a crypto wallet. This means Hong Kong regulators must not only oversee their own jurisdiction but also evaluate in advance how this product might encounter a complex web of legal conflicts once it crosses Hong Kong’s borders.

More critically, the regulatory environment for RMB-pegged stablecoins is unique. Chen Weimin explicitly revealed that mainland Chinese regulators have clarified that offshore issuance of RMB stablecoins requires approval from the mainland’s monetary authorities. Currently, no related license applications have been filed, and future licensing arrangements will depend on the regulatory environment.

This statement is highly significant. It indicates that the “token expansion path” within Hong Kong’s stablecoin ecosystem is not merely a market choice but a regulatory game requiring coordination between two jurisdictions.

Previously, the People’s Bank of China and eight other departments jointly issued a notice reiterating the prohibition of virtual currencies within the country and explicitly including stablecoin issuance under regulatory scope. In this policy context, any institution registered in Hong Kong attempting to issue RMB-pegged stablecoins must first pass the full approval process of mainland regulators.

The HKMA’s preemptive cross-border licensing is not about creating barriers but about avoiding potential regulatory conflicts at the source. It demonstrates foresight—regulators are responsible for the “full lifecycle compliance” of a product, not just stamping approval at issuance.

Dimension Three: The Deep Signal of “Expectation Management”

Yu Weiwen’s statement that the HKMA will do a good job in “market expectation management” is particularly thought-provoking.

“Expectation management” is rarely seen in public statements by financial regulators. It usually belongs to central bank communication strategies, such as forward guidance. But in the specific context of Hong Kong stablecoins, it takes on a completely different meaning.

The HKMA aims to manage the market’s perception of “stablecoin licenses” itself.

Over the past two or three years, with the rise of the global Web3 wave, a narrative has gradually formed within the crypto industry—that obtaining a compliant license from a certain country or region is like holding a “ticket” to the future. This narrative has driven many institutions to invest heavily in license applications and has also led to license premiums and speculative psychology.

But the HKMA seems to be telling the market through actions: a stablecoin license is not a “financial franchise” monopoly. It’s not a one-time exam but a long-term, dynamic responsibility. The regulatory threshold is not at the moment of licensing but every day during product operation. After the official market launch, the HKMA will continuously supervise through on-site inspections, off-site reviews, independent assessments, and meetings with management, based on the business and risk profile of each licensee.

It’s about avoiding a “one-shot” approach and instead implementing full-cycle, dynamic governance. This is the underlying message of “expectation management.”

3. Cultivating a Diverse Ecosystem with Precision

Returning to the most frequently mentioned fact in the news: the two licensed institutions have clearly different purposes.

One is HSBC—an over 150-year-old Hong Kong banknote issuer, planning to launch a Hong Kong dollar stablecoin in the second half of 2026, seamlessly integrating into two widely used digital platforms in Hong Kong: the PayMe mobile payment app and the HSBC HK App for wealth management. This almost directly embeds compliant stablecoins into the daily payment network of millions of Hong Kong citizens.

The other is DotPoint Financial Technology—formed as a joint venture by Standard Chartered Bank (Hong Kong), Hong Kong Telecom, and Anx Group. It plans to start issuing the regulated Hong Kong dollar stablecoin “HKDAP” in phases from the second quarter of 2026, adopting a B2B2C business model. The three parties bring complementary resources—Standard Chartered offers bank-level risk control and compliance experience, Hong Kong Telecom provides infrastructure and user reach, and Anx Group contributes Web3 ecosystem and technological expertise.

The path differences between these two institutions are no coincidence.

From a market structure perspective, one is a traditional banking giant directly entering stablecoins as a licensed bank, focusing on retail scenarios and seamless migration of existing customers. The other is a “bank + tech + Web3” joint venture, emphasizing wholesale tokenized asset settlement and deep integration into Web3-native scenarios.

From a regulatory perspective, parallel testing of these two paths effectively runs two entirely different stablecoin operation models. The HKMA can observe, within the same period, the differences in risk management, user protection, and system stability between the “traditional bank model” and the “hybrid architecture model.”

This is far more strategically meaningful than approving ten homogeneous licenses. It essentially prepares empirical evidence for future refined, differentiated regulatory rules. If regulators have never seen how different types of stablecoins operate in actual markets, how can they craft tailored regulatory rules for different issuer types?

Hong Kong plays a pioneering role—not merely deciding who can enter but using two years of sandbox testing, months of license review, and ongoing multi-year monitoring to provide a “Hong Kong sample” that withstands scrutiny for global stablecoin regulation.

When we revisit Yu Weiwen’s phrase “steady start, slow progress,” we might perceive it differently.

It’s not about rejecting competition but redefining it—future winners in Hong Kong’s stablecoin ecosystem will not be the fastest, but the most stable, transparent, and resilient over time.

For institutions still waiting for the second batch of licenses, the window is not closed—only the threshold has shifted from “written compliance” to “practical proof.” For the entire industry, including frontier fields like asset tokenization, a regulatory infrastructure based on real market feedback is far more promising than a rapidly expanding but fragile market.

Trust has no shortcuts; it can only be built one line at a time.

Risk warning: This article is based on publicly available information for industry observation and analysis and does not constitute any investment advice. The digital asset market is highly risky; investors should make decisions prudently based on their own judgment and bear the risks themselves.