The race to regulate stablecoins—a cornerstone of the digital financial future—is heating up across the globe. While the U.S. Congress debates the Generating Essential Needs for Innovation Under Supervision (GENIUS) Act, Hong Kong has already surged ahead, becoming the world’s first jurisdiction to establish a comprehensive regulatory framework for fiat-backed stablecoins.
On May 21, the Hong Kong Legislative Council passed the Stablecoin Ordinance Bill, introducing a licensing regime for stablecoin issuers and strengthening oversight of virtual asset activities. This landmark move not only positions Hong Kong at the forefront of digital finance innovation but also reinforces its status as a leading international financial center.
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The Strategic Importance of Stablecoin Regulation
With the global stablecoin market surpassing $250 billion, regulators worldwide are recognizing that early movers in establishing clear, risk-based frameworks will dominate the future digital economy. Hong Kong’s proactive approach exemplifies this strategic shift.
According to Ding Zhaofei, Chief Analyst at HashKey Group, “The implementation of Hong Kong’s Stablecoin Issuer Ordinance marks a critical step in balancing innovation with risk control. It fills a major regulatory gap and provides clarity for compliant market participants.”
The principle guiding Hong Kong’s framework is “same activity, same risk, same regulation.” This ensures that entities engaging in stablecoin issuance face consistent oversight regardless of technological delivery methods, aligning with international standards while fostering local innovation.
Types of Stablecoins and Regulatory Focus
Stablecoins maintain price stability through various mechanisms:
- Fiat-collateralized (e.g., USDT, USDC)
- Crypto-collateralized
- Commodity-backed (e.g., gold-linked)
- Algorithmic
Hong Kong’s new law specifically targets fiat-collateralized stablecoins, where each token must be backed 1:1 by high-quality liquid assets like cash or short-term government securities. Unlike some existing stablecoins whose reserves include commercial paper or lower-quality instruments, Hong Kong mandates full transparency and independent audits.
For instance, Tether (USDT), despite claiming a 1:1 USD peg, has faced scrutiny over reserve composition. A recent report by JPMorgan analyst Nikolaos Panigirtzoglou found only 83% of its reserves meet proposed U.S. GENIUS Act standards.
In contrast, licensed issuers in Hong Kong must:
- Maintain fully segregated reserve assets
- Submit regular public disclosures
- Undergo third-party audits
- Ensure redemption rights at par value
This level of rigor enhances investor protection and reduces systemic risks—critical lessons learned from past collapses like TerraUSD.
Building Trust Through Regulatory Clarity
Li Lianxuan, Co-Partner at HashKey Tokenisation, emphasizes that regulation isn’t about stifling innovation—it’s about enabling sustainable growth. “Clear rules help mitigate risks related to capital flows, anti-money laundering, and financial stability,” he said. “They also prevent another Terra-like disaster.”
Hong Kong’s Financial Secretary, Christopher Hui, reiterated that the ordinance prioritizes risk-based supervision, aiming to create a robust ecosystem that attracts responsible innovators while safeguarding users.
To support this transition, the Hong Kong Monetary Authority (HKMA) launched a Stablecoin Sandbox in July 2024. Participants include:
- JD Blockchain
- Yuen Yip Innovation Tech
- Standard Chartered Bank (Hong Kong)
- AnyPay Group
- Hong Kong Telecom Group
These institutions are testing use cases in payments, supply chain finance, and capital markets, laying the groundwork for real-world adoption.
Stablecoins as the Future of Payments
While Bitcoin and Ethereum serve primarily as stores of value, their volatility limits everyday utility. Enter stablecoins—digital assets with price stability and blockchain efficiency.
Liu Peng, CEO of JD Blockchain, explains: “Stablecoins combine monetary function with technological advantages. They’re emerging as powerful tools in global payments.”
Indeed, per OKG Research data, global stablecoin supply reached nearly $250 billion by May 2025, up 54% year-on-year—equivalent to about 1.13% of U.S. M2 money supply.
Advantages in Cross-Border Transactions
Traditional cross-border remittances remain slow and expensive. In Q4 2023, the average cost to send $200 was 6.4%, far above the UN’s 3% sustainable development target.
Stablecoins change this equation:
- Transactions settle in minutes
- Fees are a fraction of traditional costs
- No need for intermediaries or correspondent banks
JD Blockchain’s stablecoin is already in Phase Two of sandbox testing, offering mobile and desktop apps for retail and institutional users. Initial focus areas include:
- Cross-border corporate settlements
- Investment transactions
- Retail payments
Liu notes that many international trade firms operate out of Hong Kong. By serving these businesses first, JD aims to refine its infrastructure before broader rollout.
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Global Regulatory Trends and Hong Kong’s Unique Position
Stablecoin regulation is accelerating worldwide. Besides Hong Kong and the U.S., jurisdictions like Singapore, the EU, Japan, and Switzerland are advancing legislative frameworks.
As汪乐乐 (Wang Lele), Head of OKG Research, observes: “Over ten countries have introduced formal stablecoin regulations or draft laws. We’re moving from isolated experiments toward a cohesive global framework.”
Common regulatory pillars include:
- Issuer licensing and capital requirements
- Reserve asset quality and audit obligations
- Anti-money laundering (AML) and consumer protection
While both Hong Kong and the U.S. emphasize reserve transparency, their approaches differ:
- The U.S. uses a dual federal-state system
- Hong Kong adopts a unified regulator model under HKMA
Moreover, Hong Kong shows particular interest in HKD-pegged stablecoins, while remaining open to USD or other currency-denominated tokens. Its flexible design allows room for innovation within a controlled environment—making it an ideal Asia-Pacific compliance sandbox.
Reshaping Global Finance Infrastructure
Beyond payments, stablecoins could revolutionize the underlying architecture of global finance.
Li Lianxuan explains: “Today’s system relies on correspondent banking networks like CHIPS and SWIFT. Stablecoins enable direct peer-to-peer settlement via blockchain wallets—cutting out intermediaries entirely.”
Under optimistic projections by OKG Research:
- Global stablecoin supply could hit $3 trillion by 2030
- Annual transaction volume may exceed $100 trillion
While USD-backed stablecoins will likely dominate, regional variants—like Hong Kong dollar or euro-linked tokens—can thrive in specific corridors.
Even SWIFT isn’t immune to disruption. Despite processing 42 million messages daily in 2021, it faces growing competition from faster, cheaper blockchain alternatives.
Zhang Yinghua, Chief Business Officer at OSL, believes HKD-pegged stablecoins carry strategic significance: “They’re not just payment tools—they could reduce reliance on traditional systems amid complex geopolitical dynamics.”
FAQs: Understanding Hong Kong’s Stablecoin Future
Q: What types of stablecoins does Hong Kong regulate?
A: The ordinance focuses on fiat-collateralized stablecoins pegged to currencies like USD or HKD, requiring full reserve backing and regular audits.
Q: Who needs a license under the new law?
A: Any entity issuing stablecoins referencing HKD or promoting such tokens to the Hong Kong public must obtain an HKMA license.
Q: Can mainland Chinese firms issue RMB stablecoins in Hong Kong?
A: While possible in theory (e.g., offshore RMB stablecoins), such initiatives require coordination with mainland regulators.
Q: How does Hong Kong’s approach compare to the U.S.?
A: Both stress reserve quality, but Hong Kong uses centralized oversight (HKMA), whereas the U.S. follows a fragmented federal-state model.
Q: Will stablecoins replace SWIFT?
A: Not immediately—but they offer compelling alternatives for certain cross-border flows, especially as adoption grows.
Q: When will licensed stablecoins launch in Hong Kong?
A: Following sandbox testing, full licensing is expected by late 2025 or early 2026.
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Conclusion: A New Era for Digital Finance
Hong Kong’s Stablecoin Ordinance isn’t just a regulatory update—it’s a bold statement of intent. By combining innovation with accountability, Hong Kong is building a trusted gateway between traditional finance and Web3.
Backed by policies like the Virtual Asset Trading Platform (VATP) regime and the Web3 policy declaration since 2023, this framework creates fertile ground for compliant growth.
As global trade evolves and digital currencies gain traction, Hong Kong stands ready—not just to participate in the future of money, but to help define it.
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