Key Highlights
- Licensing requirements will apply to fiat-referenced stablecoin issuers who:
(i) Issue stablecoins in Hong Kong;
(ii) Issue港元-pegged stablecoins; or
(iii) Actively market fiat-referenced stablecoins to the Hong Kong public. Core licensing conditions:
- Full reserve backing for circulating stablecoins;
- Minimum paid-up capital of HKD 25 million or 1% of stablecoin circulation value (whichever is higher);
- Physical presence in Hong Kong.
- Sales restrictions: Only regulated entities (e.g., authorized institutions, licensed corporations, virtual asset trading platforms) may sell fiat-referenced stablecoins locally.
- Legislative timeline: Draft bill expected for Legislative Council review later this year.
Background
In December 2023, Hong Kong’s Financial Services and Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) proposed regulating fiat-referenced stablecoin issuers to mitigate monetary risks (e.g., TerraUSD collapse) and support virtual asset ecosystem growth. The finalized framework aligns with these objectives.
Regulatory Scope
What Constitutes a Fiat-Referenced Stablecoin?
Defined as crypto tokens pegged to single or multiple fiat currencies, excluding commodity-linked stablecoins. Key characteristics:
- Acts as a transaction medium;
- Maintains value stability via reserves;
- Excludes deposits, securities, or central bank digital currencies.
Licensing Triggers
Entities must obtain an HKMA license if they:
- Issue stablecoins in Hong Kong;
- Issue港元-pegged stablecoins (regardless of location); or
- Actively market issuances to Hong Kong residents.
Note: "Active marketing" criteria mirror the Securities and Futures Commission’s approach, considering language, target audience, and domain usage.
Licensing Framework
Eligibility & Core Requirements
All entities meeting these criteria may apply:
| Requirement | Details |
|---|---|
| Full reserve backing | Reserves must ≥100% of circulating stablecoin value. |
| Asset quality | High-liquidity reserves (e.g., cash, government bonds). |
| Segregation of reserves | Held in separate accounts with licensed custodians. |
| No interest payments | Prohibited to users. |
| Minimum capital | HKD 25M or 1% of stablecoin circulation (higher value applies). |
| Hong Kong presence | Local incorporation and management team required. |
| Disclosures | Regular audits and public reports on reserves. |
👉 Explore how global stablecoin regulations compare
Permitted Activities
Licensees may:
- Provide wallet services for their stablecoins;
- Conduct ancillary operations (pre-approved by HKMA).
Prohibited: Lending, financial intermediation, or unregulated activities.
Stablecoin Sales
Authorized Sellers
Only designated licensees (e.g., HKMA-licensed issuers, virtual asset platforms) may sell to retail investors. Unlicensed issuers’ stablecoins (e.g., offshore非港元 offerings) are restricted to professional investors.
👉 Learn about Hong Kong’s virtual asset policies
Implementation Timeline
- 2024 Sandbox: Three participants testing stablecoin models under HKMA supervision.
- Grace period: Existing issuers must apply within 3 months of regime生效 and wind down operations if rejected.
- Legislation: Draft bill to be tabled in late 2024; HKMA will issue compliance guidelines.
FAQ
Q: Can non-Hong Kong issuers avoid licensing?
A: Yes, if they avoid active marketing to Hong Kong residents and港元 pegs.
Q: Are algorithmic stablecoins covered?
A: No, unless they meet the fiat-referenced definition.
Q: How often must reserves be audited?
A: Quarterly by independent auditors.
Q: Can licensed issuers expand services later?
A: Only with HKMA approval for each new业务.
Q: What happens to unlicensed issuers post-grace period?
A: Must cease operations or face penalties.
For compliance queries, consult HKMA’s forthcoming guidelines.