Hong Kong Passes Law on Stablecoins
The new law complements existing laws on digital tokens and virtual assets.
With the passage of the Stablecoins Ordinance (the "Ordinance") on May 21, 2025, Hong Kong has taken a big step forward to protect its digital asset market.
The new Ordinance regulates issuers of fiat-referenced stablecoins—digital currencies designed to keep their value steady by being tied to traditional government currencies. The Ordinance takes effect on August 1, 2025, and is among the first of its kind in Asia.
Fiat-referenced stablecoins have surged in popularity recently, especially those tied to the U.S. dollar ("USD") such as Circle's USDC and Tether's USDT. This is despite investor concerns over various regulatory "blind" spots.
The Ordinance aims to address such concerns by increasing oversight and protection for investors in stablecoins. A key reason Hong Kong is well-suited for this is its currency system: Since 1983, the Hong Kong dollar ("HKD") has been officially pegged to the USD within a narrow range (7.75 to 7.85 HKD per USD), meaning a stablecoin tied to the HKD would also be tied to the USD. This peg, which has endured several financial crises and health pandemics, is a cornerstone of Hong Kong's economy and key to its status as an international finance hub.
The Ordinance applies to stablecoins that keep their value by referencing the HKD and currencies of other major global economies. Anyone issuing such stablecoins in Hong Kong—or offering HKD stablecoins to Hong Kong investors—must obtain a license from the Hong Kong Monetary Authority ("HKMA"). The HKMA has powers to supervise these issuers, investigate violations, and impose penalties.
To obtain a license, issuers of stablecoins must meet several requirements. These include capital adequacy, segregation of client funds, and anti-money laundering compliance. In addition, licensed issuers must follow the "currency matching" rule, meaning the reserve assets backing each stablecoin must be held in the same currency as the stablecoin itself. However, there will be an exception for HKD stablecoins: Their reserve assets can be held in USD instead of HKD, due to the HKD–USD peg mentioned above. Importantly, stablecoin holders will also enjoy legal protections allowing them to redeem their tokens without unreasonable restrictions or delay.
The Ordinance works alongside recent changes to the Securities and Futures Ordinance (Cap. 571) and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). Together, they aim to build a secure environment for digital investors in Hong Kong. As HKD stablecoins will be indirectly linked to the USD, this could also have an important effect on cross-border flows of HKD and USD and the Greater China economy.
