Hong Kong has taken a monumental step toward regulating digital assets by passing a new law that creates a licensing framework for fiat-pegged stablecoins (FRS). The new law is part of its broader vision to establish itself as a leading crypto hub. Passed on Wednesday by the Legislative Council, the law mandates that all stablecoin issues must obtain a license from the Hong Kong Monetary Authority (HKMA).

They must also adhere to the strict compliance standards set by the authorities. The compliance standards include reserve asset management, redemption at par value, segregation of client funds, anti-money laundering controls, and transparency in operations.

Hong Kong Passes Stablecoin Law

Secretary of Financial Services and the Treasury, Christopher Hui, said, “This ordinance follows the ‘same activity, same risks, same regulation’ principle. It aligns with global regulatory practices and lays a solid foundation for Hong Kong’s virtual asset market.”

The new legislation reflects Hong Kong’s commitment to creating a safe and innovative digital finance ecosystem following last year’s JPEX exchange scandal. This has boosted investor confidence and rejuvenated the market. The authorities are now looking to strike the perfect balance between ensuring adequate consumer protection and encouraging technological innovation.

Under the new law, only licensed entities will be permitted to issue stablecoins in Hong Kong, and only licensed offerings can be promoted to retail investors. Unauthorized advertising will be prohibited, even during the six-month grace period ahead of enforcement. Further consultations by the HKMA will refine the details of the framework.

Stablecoin Market Revitalization

The stablecoin market in Hong Kong remains modest when compared with the global markets. However, now that the new law has passed, it is being seen as a positive move towards regulatory clarity.

Justin d’Anethan, Head of Sales at token advisory firm Liquifi, said, “It gives issuers something tangible: clarity on licensing, redemption obligations, and reserve requirements, within a framework friendly to traditional finance.”

Despite the efforts, stablecoin activity in the region remains dominated by Tether, particularly among Hong Kong’s over-the-counter (OTC) cryptocurrency trading venues. Meanwhile, the U.S. continues to lead the sector, especially with recent legislative momentum.

Hong Kong’s regulatory move comes as the U.S. Senate pushes forward the GENIUS Act, a proposed nationwide stablecoin bill that has cleared a key procedural hurdle and awaits a House vote. President Trump is expected to sign it into law if passed.

“Once the leaders in forward-thinking crypto policy, Hong Kong and Singapore now face competition from an unexpectedly proactive U.S.,” d’Anethan added. The new ordinance is expected to come into effect later this year, with transitional provisions in place to allow issuers time to comply with the new requirements.

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