Hong Kong’s Stablecoin Ordinance takes effect on August 1, 2025, with a six-month transition window

The Hong Kong Monetary Authority (HKMA) will roll out a six-month transitional arrangement for stablecoin issuers already operating in the city, as the territory’s new Stablecoin Ordinance comes into effect on August 1, 2025. The move is part of Hong Kong’s effort to position itself as a regulated hub for digital assets, while tightening oversight on companies issuing fiat-referenced cryptocurrencies. The HKMA said it will issue temporary licenses to applicants who demonstrate a credible pathway toward full regulatory compliance. Companies must apply for formal licenses within three months or risk being forced to wind down their operations in the following four months. If the authority deems an applicant unfit during review, it may revoke or deny the provisional license, triggering a one-month notice period for the issuer to exit the market in an orderly manner. Stablecoin Ordinance kicks in as Hong Kong moves to regulate digital money The licensing requirements are stringent under the Ordinance. Stablecoins must be backed by high-quality and highly liquid reserves, and issuers are obligated to honor redemption requests within one business day. Eligible firms must also maintain a physical presence in Hong Kong, meet minimum capital requirements, and demonstrate both viable use cases and sustainable business models. The HKMA also requires issuers to conduct customer due diligence during issuance and redemption, verifying wallet ownership or control, and using automated transaction monitoring tools to screen wallets. High-risk wallet addresses must be blacklisted, and suspicious activity must be reported to relevant authorities. Issuers found violating the licensing terms or regulatory requirements could face a wide array of sanctions. These include fines, public reprimands, license suspensions or revocations, and even criminal referral to law enforcement. The HKMA retains full authority to investigate and penalize non-compliant entities at any point, including those holding temporary or full licenses. Hong Kong gets plaudits for caution and local ambition The Stablecoin Ordinance was passed by Hong Kong’s legislature in May 2025 . By requiring stablecoin issuers to show tangible economic utility and robust reserves, the HKMA aims to insulate retail investors and financial infrastructure from volatility and systemic risk. Market observers suggest the regulator’s conservative rollout strategy reflects a desire to attract only the most committed and compliant participants. Only a small number of licenses are expected to be granted in the early phase, with full approvals likely to begin in early 2026. The HKMA has encouraged prospective applicants to express intent and complete submissions by 30 September, though it has not disclosed how many have done so to date. Major financial and fintech players are already preparing to enter the market. In June, Ant International, a subsidiary of Alibaba’s Ant Group , signaled its intention to apply for a license. The HKMA’s regulatory clarity could offer long-term advantages for compliant players, particularly as stablecoins become more integrated into payment systems and institutional finance. Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now