Hong Kong Stablecoin Application: First Batch of Licenses Expected to Be Issued Early Next Year
Hong Kong’s stablecoin regulation is accelerating into a substantive phase. With the Stablecoin Ordinance set to take effect on August 1, 2025, the Hong Kong Monetary Authority (HKMA) released a series of accompanying regulatory documents on July 29, including the Guidelines for Regulated Stablecoin Issuers, Guidelines for Anti-Money Laundering and Counter-Terrorist Financing (Applicable to Regulated Stablecoin Issuers), and Summary of the Stablecoin Issuer Licensing Regime, establishing a comprehensive regulatory framework covering applications, operations, asset management, and anti-money laundering compliance.
This set of guidelines not only provides a clear application path and compliance standards for the stablecoin market but also demonstrates Hong Kong’s commitment to strengthening risk control while leaving policy space for the innovative development of stablecoins. This article will outline the key points of the relevant stablecoin guidelines and delve into the regulatory requirements and practical pathways.
First Batch of Stablecoin Licenses to Be Announced Early Next Year; Companies Unable to Apply Must Exit by November
“Licensing will be an ongoing process, and if individual institutions believe they are well-prepared and wish to be considered as soon as possible, they should submit their applications to the HKMA by September 30,” said the HKMA.
Currently, the HKMA has not issued any licenses, with the earliest anticipated announcement of the first licensed stablecoin issuers expected in early 2026, focusing on cross-border trade and Web3 applications. In the initial phase, only a limited number of licenses will be issued, with a higher threshold for approval, and priority will be given to applications submitted by September 30. The HKMA will publish the names of the licensed stablecoin issuers on its website.
After the Stablecoin Ordinance takes effect on August 1, 2025, for existing fiat stablecoin issuers with meaningful and substantive operations in Hong Kong, the HKMA has set a six-month transition period (until January 31, 2026), including issuing temporary licenses to issuers capable of complying with regulatory requirements.
Within the first three months after the ordinance comes into effect (i.e., by October 31, 2025), existing issuers wishing to apply for a license must submit a licensing application and relevant supporting documents, including a business plan and legal compliance declaration, and appoint personnel to carry out designated activities. If an issuer successfully submits an application and receives confirmation from the HKMA, they may continue to engage in regulated stablecoin activities until January 31, 2026.
If they fail to complete the application on time, are rejected, or withdraw their application, these issuers will enter a one-month winding-up period starting from November 1, 2025, during which they must orderly exit the business and comply with strict HKMA supervision, including asset preservation and activity restrictions. Entities that continue to engage in or present themselves as conducting regulated stablecoin activities after the winding-up period will violate the ordinance and be subject to criminal penalties. It is important to note that merely establishing a company in Hong Kong or conducting shell business in Hong Kong is insufficient to be recognized as an existing stablecoin issuer.
Implementing KYC Rules; Future Consideration of Higher Regulatory Thresholds
In terms of risk management, regulated stablecoin issuers may only appoint recognized service providers to conduct the issuance of legal stablecoins, which must be approved by the license. Recognized providers include license holders, institutions recognized under the Banking Ordinance, entities with payment licenses, approved virtual asset trading platforms compliant with the Anti-Money Laundering Ordinance, and licensed entities approved by the Hong Kong Securities and Futures Commission.
At the same time, the HKMA explicitly requires that custodial assets must be strictly segregated from the license holder’s own assets, with regular disclosures of reserve asset management policies and audit results. License holders must employ multi-signature, pre-mined coin mechanisms, secure private key management, smart contract security audits, and visible signing technologies and are advised to combine off-chain rehearsals for multi-verification to enhance risk defense levels. Beyond technical and asset aspects, the guidelines also emphasize that stablecoin issuing institutions must have a clear board structure and a sound internal control system.
To create a secure and compliant environment for Hong Kong’s stablecoin market, the HKMA, in its Guidelines for Anti-Money Laundering and Counter-Terrorist Financing (Applicable to Regulated Stablecoin Issuers), clearly outlines the regulatory requirements for anti-money laundering, including risk assessments, customer due diligence, ongoing monitoring, compliance with stablecoin transfers, and suspicious transaction reporting.
Among other things, in ongoing monitoring, the HKMA requires licensed stablecoin issuers to take effective measures to identify and verify the identities of stablecoin holders. Customers must undergo comprehensive customer due diligence (CDD) procedures and periodic reviews (such as name, date of birth, identity document number, etc., retained for at least 5 years); non-customer holders generally do not need to verify their identities directly. However, if monitoring reveals wallet addresses related to illegal activities, sanctions lists, or suspicious sources, and the license holder cannot demonstrate that their risk mitigation measures (such as blockchain analysis tools) are sufficient to prevent ML/TF risks, the license holder must further investigate and verify the identities of the relevant holders.
Concerns have been raised in the industry regarding the requirement for stablecoin holders to complete identity verification, as it may limit the number and scale of stablecoin users. It is worth mentioning that the HKMA also stated it will continue to explore establishing mutual recognition mechanisms with other jurisdictions, keep an eye on international regulatory dynamics concerning systemic stablecoins, and consider setting higher regulatory thresholds in due course.
Full Reserve Asset Support Required; Multi-Currency Stablecoins Allowed
Regarding the reserve asset support capability for stablecoins, the regulatory guidelines clearly state that all issued stablecoins (including frozen or blacklisted coins) must be fully backed by assets. Eligible reserve assets include cash, bank deposits, negotiable debt securities, and other high-quality, highly liquid, and low-risk assets recognized by the HKMA. The HKMA will implement a proportional regulatory principle, applying differentiated risk mitigation requirements based on the types and structures of the reserve assets held by license holders, but custodians must be licensed banks in Hong Kong or financial institutions with equivalent qualifications.
License holders may issue “designated stablecoins” pegged to different fiat currencies based on market demand, but new currencies must be approved by the HKMA. License holders must also demonstrate corresponding governance capabilities, technical capabilities, and resource support to avoid the spillover of multi-currency management risks. To enhance the flexibility and efficiency of reserve assets, the HKMA adopts a technology-neutral principle and allows license holders to hold qualified assets as reserves in tokenized form, subject to HKMA’s written approval. In special circumstances, the HKMA allows license holders to apply for currency mismatches but requires case-by-case approval and reasonable explanations.
Furthermore, the HKMA requires license holders not to pay interest on the stablecoins they issue and does not restrict the custody of reserve assets overseas. License holders are permitted to engage third-party investment managers for asset management, provided they 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 license holders to establish efficient, transparent, and user-friendly process mechanisms, mandating that redemption requests be processed within a reasonable time without setting unreasonable thresholds or fees. Although the Stablecoin Ordinance stipulates that redemption requests must be processed within one working day, this timeline refers to the processing limit after the holder has completed the required conditions (such as identity verification, funding path confirmation, etc.), and the initial compliance review time is not included in this processing time.
It is worth noting that the HKMA does not impose a mandatory requirement for stablecoin issuers to establish market-making mechanisms. However, if such arrangements are set up, potential conflicts of interest and market manipulation risks must be mitigated.
To support the global development of Hong Kong’s stablecoin market, the HKMA supports distribution through overseas channels, but issuers must establish a sound compliance and risk control system. Additionally, regarding circumstances where related services are accessed via VPNs, regulators insist on a risk-based approach and will not adopt a one-size-fits-all blocking method.
Applicants Must Maintain Not Less Than HKD 25 Million in Paid-Up Capital and Establish a Local Office in Hong Kong
Any institution intending to engage in stablecoin issuance and related businesses must obtain approval from the HKMA. Applicants and license holders must continuously meet certain criteria to ensure the compliance, soundness, and investor protection of stablecoin issuance activities.
According to the requirements, applicants must be corporations established in Hong Kong or recognized institutions incorporated outside Hong Kong. Whether the applicant is a Hong Kong or overseas corporation, it must establish a substantial operational base in Hong Kong and clearly outline its operational arrangements in Hong Kong in the application materials, including office location, resident personnel plans, and contact information.
At the same time, the licensing application must meet minimum criteria, including financial resources, risk management, information disclosure, and business activities.
For instance, applicants must have sufficient financial resources, maintaining not less than HKD 25 million in paid-up capital or equivalent recognized financial resources; they are required to submit relevant documents, including a business plan and financial budget for the next three years, audited reports for the past three fiscal years, and anti-money laundering/counter-terrorist financing risk assessment reports; executives and key personnel must have relevant knowledge and experience and be based in Hong Kong to ensure effective management and supervision. The HKMA may conduct interviews with the applicant’s board members, CEO, etc.; applicants must develop and implement comprehensive risk management policies and procedures.
From the public application process perspective, applicants should first engage in preliminary informal discussions with the HKMA to understand licensing requirements and shorten the subsequent application processing time. Applicants must submit complete documents, including the application form, three-year business plan and financial budget, articles of incorporation, organizational structure chart, and risk management policies. If the application is approved, the HKMA will record the license holder’s information and publish the effective date; conversely, the applicant will be notified in writing with reasons for rejection. Of course, applicants cannot publicly claim to have obtained a license until their application has been approved.
According to HKMA CEO Yue Wai Man‘s statement on July 18, it has been revealed that dozens of institutions have proactively contacted the HKMA team, with some clearly expressing their intention to apply for stablecoin licenses, while others are in preliminary inquiry stages.
Additionally, according to Lily Z. King, COO of Cobo, in an interview with Hong Kong 01, the company is currently assisting about 50 to 60 potential clients in preparing for stablecoin license applications in Hong Kong, half of whom are payment institutions, while the other half are well-known internet companies, mostly with Chinese background. However, it is expected that the initial phase in Hong Kong may issue only 3 to