Hong Kong's stablecoin regulatory "test": The first batch of licenses will be issued in early 2026, with KYC real-name system as a mandatory threshold.

The regulation of stablecoins in Hong Kong is accelerating towards a substantial phase. With the "Stablecoin Regulation" set to officially take effect on August 1, 2025, the Hong Kong Monetary Authority (HKMA) simultaneously released a series of accompanying regulatory documents on July 29, including the "Regulatory Guidelines for Licensed Stablecoin Issuers," "Guidelines for Combating Money Laundering and Terrorist Financing (Applicable to Licensed Stablecoin Issuers)," and "Summary of the Licensing System for Stablecoin Issuers," establishing a comprehensive framework covering asset compliance, Risk Management, and consumer protection. These guidelines not only provide a clear application pathway and compliance standards for the stablecoin market but also demonstrate Hong Kong's commitment to strengthening risk prevention while leaving room for policy space for innovative development of stablecoins. This article will organize the key points of the relevant stablecoin guidelines and provide an in-depth interpretation of the supervisory requirements and practical pathways.

1. The first batch of licenses is expected to be announced early next year, and companies that have not applied must exit the business by November.

The Hong Kong Monetary Authority stated: "Licensing will be an ongoing process, and if individual institutions believe they are fully prepared and wish to be considered as soon as possible, they should submit their applications to the Hong Kong Monetary Authority before September 30." Currently, the Monetary Authority has not issued any licenses, and the first batch of licensed stablecoin issuers is expected to be announced as early as early 2026, focusing on cross-border trade and Web3 applications. In the first phase, only a few licenses will be issued, with higher thresholds, and priority will be given to applications submitted before September 30. The Monetary Authority will publish the names of licensed stablecoin issuers on its website.

After the Hong Kong Stablecoin Ordinance comes into effect on August 1, for fiat stablecoin issuers that currently have meaningful and substantial business operations in Hong Kong, the Monetary Authority has set a 6-month transition period (until January 31, 2026), which includes issuing temporary licenses to issuers capable of complying with regulatory requirements. Within the first 3 months after the Stablecoin Ordinance comes into effect (i.e., before October 31, 2025), existing issuers intending to apply for a license need to submit a licensing application and relevant supporting documents, including a business plan and a legal compliance declaration, and appoint personnel to carry out designated activities. If the application is successfully submitted and confirmed by the Monetary Authority, the issuer may continue to engage in regulated stablecoin activities until January 31, 2026.

If the application is not completed on time, is rejected, or withdrawn, this part of the issuer will enter a one-month wind-down period starting from November 1, 2025, during which they must exit the business in an orderly manner and accept strict supervision from the Monetary Authority, including measures such as asset custody and activity restrictions. Continuing to conduct or presenting oneself as conducting regulated stablecoin activities after the wind-down period will violate the regulations and be considered a criminal offense. It is important to note that merely setting up a company in Hong Kong or conducting shell business in Hong Kong is not sufficient to be regarded as an original stablecoin issuer.

2. Implement KYC regulations, considering establishing higher regulatory thresholds in the future

In terms of Risk Management, licensed stablecoin issuers may only appoint approved service providers to conduct the issuance of fiat stablecoins, and such issuance activities must obtain license approval. Approved providers include licensed entities, institutions recognized under the Banking Ordinance, entities with payment licenses, virtual trading platforms that are approved and comply with the Anti-Money Laundering Ordinance, and licensed entities with Type 1 licenses approved by the Hong Kong Securities and Futures Commission.

At the same time, the Monetary Authority clearly requires that the custodial assets must be strictly separated from the licensee's own assets, regularly disclosing reserve asset management policies and audit results. Licensees are required to adopt technical measures such as multi-signature, pre-mined coin mechanisms, secure private key management, smart contract security audits, and visible signing. It is also recommended to combine off-chain rehearsals for multiple validations to enhance the risk defense level. In addition to technical and asset aspects, the guidelines also emphasize that stablecoin issuance institutions must have a clear board structure and a sound internal control system.

To create a safe and compliant environment for the stablecoin market in Hong Kong, the Monetary Authority has clarified the regulatory requirements for anti-money laundering in the issued "Guidelines on Anti-Money Laundering and Counter-Terrorist Financing (Applicable to Licensed Stablecoin Issuers)", including risk assessment, customer due diligence, ongoing monitoring, compliance for stablecoin transfers, and suspicious transaction reporting, among others. In ongoing monitoring, the Monetary Authority requires licensed stablecoin issuers to take effective measures to identify and verify the identity of stablecoin holders. Customers must undergo a complete Customer Due Diligence (CDD) process and be reviewed regularly (such as name, date of birth, identification number, etc., retained for at least 5 years); non-customer holders generally do not need to verify their identity directly. However, if monitoring reveals wallet addresses related to illegal activities, sanctions lists, or suspicious sources, and the licensee cannot demonstrate that their risk mitigation measures (such as blockchain analysis tools) are sufficient to prevent ML/TF risks, the licensee must further investigate and verify the identity of the relevant coin holders.

Regarding the requirement for stablecoin holders to complete identity verification, industry insiders have also expressed concerns, believing that this may limit the number and scale of stablecoin users. It is worth mentioning that the Monetary Authority has also stated that it will continue to explore the establishment of regulatory mutual recognition mechanisms with other jurisdictions, paying attention to international regulatory dynamics regarding systemic stablecoins, and will consider establishing higher regulatory thresholds in a timely manner.

3. Full Reserve Asset Support and Multi-Currency Stablecoin Issuance

Regarding the support capability of reserve assets for stablecoins, regulatory guidelines clearly state that all issued stablecoins (including those that are frozen or blacklisted) must be fully asset-backed. Qualifying reserve assets include cash, bank deposits, marketable debt securities, and other high-quality, high-liquidity, and low-risk assets recognized by the Monetary Authority. The Monetary Authority will implement a proportional supervision principle, applying differentiated risk mitigation requirements based on the types and structures of reserve assets held by licensees, but custodians must be licensed banks in Hong Kong or financial institutions with equivalent qualifications.

License holders can issue "designated stablecoins" pegged to different fiat currencies based on market demand, but new coin types must be approved by the Monetary Authority. License holders must also demonstrate the corresponding governance capabilities, technical capabilities, and resource support to avoid the spillover of multi-coin management risks. To enhance the flexibility and efficiency of reserve assets, the Monetary Authority adopts a technology-neutral principle, allowing license holders to hold qualified assets in a tokenized form as reserves, but written approval from the Monetary Authority is required. In special circumstances, the Monetary Authority allows license holders to apply for coin mismatches, but case-by-case approval must be obtained and reasonable explanations provided.

In addition, the Monetary Authority requires licensees not to pay interest on their issuance of stablecoins, and does not restrict the custody of reserve assets overseas, while allowing the delegation of third-party investment managers for asset management, provided that licensees ensure the transparency, security, and liquidity of the assets, and regularly disclose audited reserve reports to enhance market confidence.

In terms of issuance, redemption, and distribution, the guidelines require licensees to establish efficient, transparent, and user-friendly process mechanisms. Redemption requests must be processed within a reasonable time and should not set unreasonable thresholds or charges. Although the Stablecoin Regulation stipulates that redemption requests must be processed within one business day, this time requirement refers to the processing time after the holder has completed the necessary conditions (such as identity verification, fund path confirmation, etc.), and the time for prior compliance review is not included in the processing time.

It is worth noting that the Monetary Authority does not mandate stablecoin issuers to establish a market maker mechanism, but if such arrangements are set up, potential conflicts of interest and market manipulation risks must be prevented. To support the global development of Hong Kong's stablecoin market, the Monetary Authority supports distribution through overseas channels, but issuers must establish a robust compliance and risk control system. In addition, regarding situations where services are accessed via VPN, the regulation insists on a risk-based principle and does not adopt a one-size-fits-all approach to blocking technical means.

IV. License Application Progress and Market Dynamics

According to a disclosure by the Chief Executive of the Hong Kong Monetary Authority, Yu Weiwen, on July 18, dozens of institutions have actively contacted the HKMA team, with some clearly expressing their intention to apply for stablecoin licenses, while others are in a preliminary exploratory phase. Additionally, according to an interview with Lily Z. King, COO of Cobo, in Hong Kong 01, the company is currently assisting about 50 to 60 potential clients in preparing for the stablecoin license application in Hong Kong, half of which are payment institutions and the other half are well-known internet companies, most of which have Chinese backgrounds. However, it is expected that Hong Kong may only issue 3 to 4 licenses in the first phase, with a total not exceeding 10.

As of now, multiple institutions have clearly announced their applications for stablecoin licenses, including JD Coin Chain Technology, Ant International, Standard Chartered Bank (Hong Kong), and Round Coin Innovation Technology.

Conclusion:

The regulation of stablecoins in Hong Kong is accelerating into a substantive phase, with the first batch of licenses expected to be issued early next year. This comprehensive and strict regulatory framework aims to ensure the sound development of the stablecoin market and requires holders to complete identity verification. Although this may have a certain impact on the number and scale of users, Hong Kong is striving to strike a balance between innovation and risk prevention, aiming to become a model for the global stablecoin market.