Hong Kong Criminalizes Promotion of Unlicensed Stablecoins

Hong Kong has criminalized the promotion of unlicensed stablecoins starting from August 1. This marks a major shift in the regulatory landscape of the city as it strengthens oversight of the rapidly expanding crypto sector. Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue made the announcement via a strongly worded blog in which he warned retail investors.

He asked them to remain cautious amid the growing excitement and speculative behavior in the stablecoin market.

Hong Kong Warns Against Promotion of Unlicensed Stablecoins

Yue emphasized that under the incoming Stablecoins Ordinance, offering or promoting fiat-referenced stablecoins (FRS) without a license will become a punishable offense.

“This law will protect retail investors from manipulation and potential fraud. We urge the public to stay vigilant and avoid unknowingly breaching the law,” Yue wrote.

Hong Kong is working on a strong set of rules for digital assets, especially stablecoins, which are cryptocurrencies that are linked to established currencies like the US dollar or the Hong Kong dollar. The new law is part of this effort.

The crackdown comes at a time when businesses are very interested in stablecoins. Yue said that in the past few months, more than 40 companies have contacted regulators to ask about getting into the stablecoin business. However, a lot of the projects are still in the early stages and don't have the basic business skills they need, such as good risk management and technical infrastructure.

Notable names reportedly preparing to apply for licenses include Ant Group, JD.com, Standard Chartered, and Circle, along with several law firms indicating their clients are finalizing application documents. These submissions are expected to begin once the law takes effect next month.

The new law will introduce strict requirements for licensing both stablecoin issuers and service providers. Initially, only a limited number of licenses will be granted, and retail promotion will be restricted to those holding valid HKMA approval. Unlicensed issuers may only target professional investors.

Under the new rules, all stablecoins must be fully backed by high-quality, liquid reserves in the same fiat currency. These may include cash, bank deposits, or government bonds, and must be held in trust, segregated from the issuer’s own assets and safeguarded from creditor claims in case of insolvency.

Yue stressed that recent promotional activity by some firms had flirted with market manipulation, warning investors to beware of companies that make announcements merely to boost stock prices.

“Some listed companies use vague declarations about stablecoin ventures to inflate valuations. Investors should stay calm and apply independent judgment,” he said.

Hong Kong’s stablecoin legislation aligns with global efforts to regulate digital currencies. Earlier this month, the United States enacted a landmark stablecoin bill under President Donald Trump, while the Bank for International Settlements warned of money laundering risks tied to cross-border stablecoin use.

The HKMA plans to release its final supervisory and anti-money laundering guidelines by the end of July and will publish an explanatory note next week detailing the application process and evaluation criteria for stablecoin licenses.

“Regulation is a balancing act. We aim to support innovation while ensuring market integrity and investor protection,” Yue concluded. As Hong Kong moves toward implementation, the city continues to position itself as a leading and compliant digital finance hub in Asia.