The profound significance of Hong Kong's new stablecoin regulations for institutions
On August 1, 2025, the Hong Kong (Stablecoin Ordinance) will officially take effect, marking Hong Kong as one of the first global financial centers to implement comprehensive licensing regulation for fiat-backed stablecoins. This regulation clarifies the compliance framework for stablecoin issuers, with strict standards from license issuance, reserve requirements to anti-money laundering (AML)/counter-terrorism financing (CFT) obligations, which have multiple profound implications for various financial institutions, licensed payment service providers (SVF license holders), and crypto asset platforms.
1. Legal status transformation: Stablecoin issuers are recognized as 'financial institutions'
According to the new regulations, licensed stablecoin issuers will be legally regarded as 'financial institutions' and must comply with multiple regulations, including the (Banking Ordinance), (Payment Systems and Stored Value Facilities Ordinance) (PSF/SVF), and (Anti-Money Laundering Ordinance).
• Same regulatory standards: This means that banks, SVF license holders, and newly licensed stablecoin issuers share the same compliance obligations, enjoying the same legal status and regulatory transparency as traditional financial institutions while also bearing the same prudent regulatory and capital requirements.
• Enhanced returns and trust: After obtaining a license, the stablecoins issued by institutions will be registered and regulated by the Monetary Authority, which can enhance market and corporate client trust, while also providing institutions with market access qualifications equivalent to traditional finance.
2. Compliance costs and operational model transformation
License applicants must meet high threshold conditions such as a minimum registered capital of HKD 25 million, 100% fiat currency reserves, independent custody, and daily valuation audits.
• Threshold effects from high investment: For large banks, insurance companies, and payment institutions with SVF licenses, the significant capital and technical team investment is relatively controllable; however, for small and medium-sized FinTech and crypto startup teams, it creates significant entry barriers.
• Reconstruction of operational models: Institutions must fully upgrade their issuance, redemption, compliance reporting, risk management, and technical security to meet the requirements for 'redeemable at any time, dynamic full reserves', fundamentally reshaping the business processes and technical architecture of stablecoins.
3. Product innovation and new opportunities in cross-border payments
Hong Kong's emphasis on 'same industry, same regulations' and encouragement of innovation means institutions can gain:
1. Cross-border payments and settlements: A robust licensing system and high trust will help banks and payment platforms launch HKD and USD-backed stablecoins for real-time cross-border fund transfers and currency exchange, further improving transaction efficiency and reducing costs.
2. Integration of open banking and DeFi: Compliant stablecoins can interface with open banking APIs, providing a seamless experience of 'fiat as on-chain assets' in open API and smart contract scenarios, laying the foundation for institutions to create new digital asset products.
4. Risk control and AML/CFT: Compliance capability is the key competitive strength
The new regulations require issuers to implement strict KYC/AML reviews for all customers, with a zero-threshold Travel Rule applicable to stablecoin transfers of all amounts, and continuous monitoring of non-custodial wallets and distribution channels.
• Strengthening internal controls and audits: Institutions need to establish real-time transaction monitoring, compliance reporting, and suspicious transaction reporting systems, and regularly undergo third-party audits and inspections by the Monetary Authority.
• Significant competitive advantages: Globally, institutions that have established comprehensive AML/CFT systems will find it easier to obtain Hong Kong licenses and can use this to build a compliance-first brand barrier, attracting enterprises and institutional clients with high compliance requirements.
5. Strategic positioning: Keeping pace with the rhythm of the digital asset hub
The Deputy Chief Executive of the Hong Kong Monetary Authority stated that initially only a limited number of licenses will be issued, starting licensing in early 2026, and encouraging institutions to apply by August 31 to receive regulatory feedback.
• First-mover advantage: Institutions that obtain licenses first will seize opportunities in the Asian stablecoin market and leverage Hong Kong's position as an offshore financial center to expand into Greater China and the Asia-Pacific market.
• Synergy effects: By coordinating with existing bank, securities, and fund licenses in Hong Kong, bank-level digital deposits, compliant custody, and wealth management products can be derived, creating a complete digital asset ecosystem.
The introduction of new regulations for stablecoin supervision in Hong Kong presents both a stringent compliance challenge for institutions and a valuable opportunity to reshape business models and gain a market edge. For banks, SVF, and large fintech companies with strong capital strength and compliance experience, this means they can occupy a strategic position in the global stablecoin competition; for crypto and FinTech practitioners, they must quickly enhance their compliance and technical capabilities to effectively respond to market competition and regulatory requirements in the new ecosystem. As industry insiders say, 'In the wave of digital asset development, the true winners are not just the technology leaders but also the compliance pioneers.'