The Hong Kong Stablecoin Ordinance officially came into effect on August 1st, and is considered by the industry to be a "significant milestone in global stablecoin compliance." However, its strong Know Your Customer (KYC) requirements and high-threshold exclusivity design, comparable to the world's strictest stablecoin laws, have sparked heated debate among Web3 project partners and the community. (Previous: Bloomberg Opinion: Hong Kong taxis demonstrate a perfect example of "stablecoins in daily life") (Background: The Hong Kong Stablecoin Ordinance takes effect today. Standard Chartered Bank: Apply to become an issuer as soon as possible.) Introduction: On August 1, 2025, the Hong Kong Stablecoin Ordinance officially came into effect. The Ordinance clearly stipulates that any institution issuing or providing fiat-backed stablecoins to local retail customers in Hong Kong must apply for a license from the Hong Kong Monetary Authority and strictly comply with reserve mechanisms, AML/KYC obligations, and transparency requirements. The Hong Kong Monetary Authority also announced the launch of applications for stablecoin licenses. The first round of applications will close on September 30th, and the first batch of licenses is expected to be issued in early 2026. This series of actions has been hailed by the industry as a "significant milestone in global stablecoin compliance." However, due to its strong Know Your Customer (KYC) requirements and high threshold for exclusivity, comparable to the world's strictest stablecoin regulations, it has sparked heated debate within the Web3 project and the community. Meanwhile, the US SEC's Project Crypto initiative, which proposes an "innovation exemption" that avoids cutting corners, stands in stark contrast to Hong Kong. An Overview of the Core Stablecoin Regulations: Under the new regulations, all activities in Hong Kong that issue, circulate, or provide fiat-backed stablecoins to local retail users must obtain a dedicated license from the Hong Kong Monetary Authority. Core requirements include: ・ Capital requirement: Minimum paid-in capital of HK$25 million; ・ Reserve mechanism: 100% backed by high-quality liquid assets (cash, short-term government bonds), requiring segregated custody and prohibiting re-hypothecation; ・ Redemption mechanism: Users must be able to redeem at par within one day; ・ Know Your Customer (KYC) system: All user identities must be retained for at least five years, with DeFi scenarios and anonymous wallet access explicitly prohibited; ・ Promotional prohibition: Unlicensed stablecoins may not be marketed to the public, and violators may face fines and criminal penalties. Of all the regulatory provisions, the KYC real-name verification requirement has become the most controversial point in the Web3 community.According to the HKMA's requirements, stablecoin issuers must not only verify user identity information and retain data records for at least five years, but also prohibit providing services to anonymous users. Initially, every holder of a compliant stablecoin in Hong Kong will also be required to undergo identity verification. In response, a Hong Kong Legislative Council member stated that the HKMA will indeed implement Know Your Customer (KYC) regulations, but the specific implementation method is currently uncertain, with a real-name system being one option. Hong Kong Monetary Authority Executive Director (Regulation and Anti-Money Laundering) Chan King-ku also noted that this arrangement is more stringent than the "whitelist" mechanism proposed in an earlier anti-money laundering consultation document. However, he also stated that as relevant technologies mature, the possibility of a moderate relaxation of regulations cannot be ruled out in the future. This means that stablecoins in Hong Kong may not initially be able to interact directly with DeFi protocols. Decentralized wallets and permissionless addresses will be isolated from the compliance system, and such interactions will be considered "unauthorized use" under the law. This suggests that Hong Kong regulators prioritize regulatory control over the circulation of stablecoins over the scalability and freedom of on-chain protocols. This move and attitude has been viewed by some industry insiders as a dampener on the potential of stablecoins to open up financial scenarios on-chain. This represents a significant divergence from the existing mainstream stablecoin model (e.g., USDT and USDC), which allows for free transfers between wallets and seamless integration with DeFi protocols. This will inevitably impact user experience and adoption. To make matters worse, according to the Hong Kong Monetary Authority's (Stablecoin Issuer Regulatory Framework) regulations, licensees must comply with the laws and regulations of the relevant jurisdictions when "offering specified stablecoins." This regulation emphasizes not only ensuring compliance with issuance regulations, but also the establishment of a comprehensive set of institutional safeguards covering cross-border operations, identifying prohibited areas, and proactively blocking transactions. These obligations specifically include the following three: 1. Prohibition of providing services to specific regions: Licensees must ensure that they do not issue or offer stablecoins in jurisdictions where trading is prohibited. Regulators recommend this be achieved through a multi-faceted approach, including: verifying user identity documents (e.g., ID cards or passports) to identify nationality or place of residence;The user's true geographic location is determined through IP addresses or GPS positioning technology; access from restricted areas is technically masked to prevent downloads, registrations, or purchases. This requirement essentially requires licensees to act as a "geographic risk firewall," cutting off potential access to restricted areas at the point of issuance to prevent violations of foreign laws or cross-border regulatory disputes. Section 3.5.3 also explicitly states that licensees must verify whether users are using virtual private networks (VPNs). This means that if stablecoins are not permitted in your location, even using a VPN is a violation. This significantly raises the barrier to entry for users, requiring each user to submit identity verification, creating a cumbersome process that negates the "open a wallet and use it" experience. It can also hinder global access. Non-Hong Kong users may not be able to use Hong Kong-issued stablecoins in practice unless explicitly included in the policy. Transfers are also strictly restricted. Stablecoin licensees are considered financial institutions and must comply with FATF's rules on funds transfers. Before a transfer is made, both the recipient and the initiator must complete Know Your Customer (KYC) and provide relevant information. Otherwise, the platform or contract may block the transaction. This Hong Kong regulatory requirement essentially transforms "stablecoins" into electronic certificates in the form of controlled-circulation electronic money or bank tokens. These stablecoins are no longer characterized as universal decentralized assets on a blockchain, but rather as digital instruments with real-name ties, geographical restrictions, and accompanying regulatory oversight. 2. Overseas Marketing and Operations Must Be Fully Compliant In addition to the obligation to block jurisdictions prohibiting transactions, the regulations also require licensees to ensure that all business operations and marketing activities (such as advertising, partnership channels, and application deployment) comply with the applicable laws and regulations of the target market. This means: ・ Marketing content must not be pushed to unlicensed regions; ・ Overseas partners must be assessed for their regulatory compliance qualifications; ・ Website language versions and terms of service must be carefully handled to avoid legally constituting the "actual provision of services." 3. Continuous Monitoring and Dynamic Adjustment Mechanism Regulators further require licensees to establish a continuous monitoring mechanism to closely monitor policy changes in various countries/regions and promptly adjust their business strategies and technical measures.For example, if a country issues a new ban on stablecoins, issuers should immediately terminate related services. If regulatory standards are strengthened (e.g., requiring additional licenses or real-name verification), KYC processes and compliance review systems should be updated simultaneously. Dr. Xiao Feng, Chairman and CEO of HashKey Group, has stated that in traditional finance, anti-money laundering mechanisms rely heavily on identity-based information retrieval and account information connectivity. However, in practice, this system faces severe bottlenecks in scenarios involving multiple banks, multiple regions, and cross-jurisdictional boundaries. In contrast, the on-chain tracking and address tagging mechanisms developed in recent years by the crypto industry offer an alternative approach to anti-money laundering. In a blockchain system, every transfer is public and transparent, and the historical flow of funds to any address can be fully traced. From...

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