The Hong Kong Monetary Authority (HKMA) announced strict regulations effective from 1/8/2025, requiring identity verification for each stablecoin holder.
The Hong Kong Monetary Authority (HKMA) has just announced a series of documents related to the new regulations on stablecoins, effective from 1 August 2025. This regulation imposes mandatory identity verification requirements for each stablecoin holder, exceeding current international standards and creating a stringent precedent in the digital asset industry.
Unlike many other countries where stablecoin issuers only need to conduct anti-money laundering (AML) measures with direct partners, HKMA has imposed more comprehensive requirements. Although the agency still allows the use of blockchain analysis to support compliance efforts, in a key provision, HKMA states that these measures 'have not been proven sufficiently effective to address risks.'
According to the new regulations, unless the licensed entity can convincingly demonstrate to HKMA that current risk mitigation measures are sufficient to combat money laundering, terrorist financing, and other crimes, the identity of each individual holding stablecoin must be verified. Verification can be carried out directly by the issuer or through intermediaries such as crypto exchanges, banks, or other 'reliable' third parties.
Cautious approach compared to international standards
HKMA Chief Executive Eddie Yue hinted at this position when he stated that he did not expect early-stage stablecoins to achieve large volumes due to strict compliance requirements. This perspective is clearly reflected in today’s documents, showing that this is a cautious approach during the early stages of implementation.
HKMA cites the recent views of the Bank for International Settlements (BIS) on the vulnerability of stablecoins, as well as remarks from the Financial Action Task Force (FATF) that some countries have adopted a cautious regulatory stance. The agency also stated it would continue to assess the effectiveness of this measure based on the development of the global legal landscape, technological advancements related to identification solutions, and updated international practices.
Currently, most countries with laws on stablecoins such as the United States, Singapore, and the EU do not require full identity verification of all holders. However, the EU still applies enhanced due diligence mechanisms for certain transactions involving self-custody wallets.
A similar case occurred when the subsidiary of Société Générale Bank issued the EURCV stablecoin, initially requiring comprehensive user identity verification, and later relaxed this policy. The new regulations in Hong Kong raise questions about the competitiveness of stablecoins issued from this special administrative region compared to other jurisdictions with more flexible regulations.