Hong Kong Enacts Stablecoin Licensing Law to Bolster Digital Asset Market

Hong Kong has officially enacted a comprehensive stablecoin licensing law, marking a significant step in its ambition to become a leading global hub for digital assets. The legislation, passed by the Legislative Council on May 21, 2025, establishes a regulatory framework requiring issuers of fiat-backed stablecoins—particularly those tied to the Hong Kong dollar—to obtain licenses from the Hong Kong Monetary Authority (HKMA). This move aligns Hong Kong with other major jurisdictions like the European Union and the United States, which have been developing their own stablecoin regulations.

The new law mandates strict compliance measures for stablecoin issuers, including robust reserve asset management, clear redemption protocols, and comprehensive risk management strategies. These requirements aim to protect investors and ensure the stability of the financial system. HKMA Chief Executive Eddie Yue Wai-man emphasized that the ordinance establishes a “risk-based, pragmatic, and flexible regulatory regime” designed to support the responsible and sustainable development of Hong Kong’s digital asset ecosystem.

To facilitate the transition, the HKMA plans to conduct further consultations on specific aspects of the regulatory regime, such as reserve requirements and disclosure obligations. Additionally, a sandbox program has been introduced to allow selected stablecoin issuers to trial their products under regulatory supervision. This initiative reflects Hong Kong’s commitment to fostering innovation while maintaining financial stability.

The enactment of this law is part of Hong Kong’s broader strategy to enhance its competitiveness in the rapidly evolving digital finance landscape. By providing regulatory clarity and promoting a secure environment for digital asset transactions, Hong Kong aims to attract global enterprises and institutions interested in issuing stablecoins and engaging in digital finance activities within the region.