On May 21, 2025, the Legislative Council of Hong Kong formally passed the Stablecoin Bill (hereinafter referred to as the Stablecoin Bill), which was published in the Gazette on May 30, 2025 and will be implemented in 2025. Following the progress of the Legislative Council, the Hong Kong Monetary Authority (hereinafter referred to as the HKMA) issued two consultation documents (drafts for comments) on May 26 - the "Consultation Paper on Proposed Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) Requirements for Regulated Stablecoin Activities" (hereinafter referred to as the "Anti-Money Laundering Consultation Paper") and the "Draft Guidelines for the Supervision of Licensed Stablecoin Issuers" (hereinafter referred to as the "Regulatory Guidelines Consultation Paper"). The former clarifies the anti-money laundering and counter-terrorist financing obligations that licensed stablecoin issuers must fulfill, and the latter covers the regulatory standards for reserve asset management, information disclosure, cybersecurity and financial soundness, aiming to standardize the operating framework of licensed issuers. The Stablecoin Ordinance is a milestone in the field of virtual asset regulation in Hong Kong, China. The Ordinance will form the legal basis for the stablecoin market in Hong Kong together with the Anti-Money Laundering Consultation Document and the Regulatory Guidance Consultation Document to be officially released in the future.
Not long ago, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (hereinafter referred to as the "GENIUS Act") was passed by the U.S. Senate with 66 votes in favor and 32 votes against. It can be seen that the United States and Hong Kong, China, as important global financial centers, are engaged in institutional competition around stablecoin regulation and even the international monetary system. Can Hong Kong become a practical model for the global stablecoin market with its location advantages, maturity of financial systems and open attitude towards innovative technologies? This article will focus on analyzing the institutional highlights and legislative process of the Hong Kong Stablecoin Ordinance, and by comparing the stablecoin bills of the United States and Hong Kong, China, analyze the potential impact of the two on the crypto industry.
This section summarizes the legislative process of stablecoins in Hong Kong into the following table:
From the discussion document on crypto assets in early 2022, to the implementation of the virtual asset trading platform licensing system in 2023, to the verification of technical feasibility through sandbox testing in 2024, and finally to the completion of the third reading of legislation in May 2025, it can be seen that the Stablecoin Ordinance, which preempted the GENIUS Act, was not hastily launched, but was the product of gradual improvement after three and a half years of complete legislative process.
The “Stablecoin Ordinance” is divided into 11 parts with a total of 175 articles. It provides a detailed explanation of the definition of stablecoins, licensing system, obligations of licensees, powers of the HKMA, criminal offenses and penalties, and supervision mechanisms. We will start from the three aspects of the definition of stablecoins, anchor asset requirements, and coin issuer requirements to sort out the main content framework of the “Stablecoin Ordinance”.
In terms of regulatory objects, the Stablecoin Ordinance defines stablecoin as "cryptographically protected digital value" that meets five major elements: (1) expressed in the form of a unit of account or a store of economic value; (2) used or intended to be used as a medium of public exchange for payment, debt repayment or investment; (3) electronically transferable, stored or traded; (4) operated on a distributed ledger (which must meet the four characteristics of transaction record retention, network sharing, consensus verification and node synchronization) or similar information repository; (5) designed to maintain a stable value with reference to a single asset or a group/basket of assets.
The above definition of stablecoin is relatively broad, but only stablecoins that are anchored to a certain standard value are the regulatory objects of the Stablecoin Ordinance (defined as "specified stablecoins"). Article 4.1 of the Stablecoin Ordinance provides that specified stablecoins must refer entirely to "one or more official currencies" (such as the U.S. dollar, Hong Kong dollar), or to "a unit of calculation or form of economic value storage specified in a notice published by the HKMA in the Gazette", or a combination of the above, and must "maintain a stable value" through an asset anchoring mechanism. Therefore, algorithmic stablecoins that lack the support of physical assets, even if they meet the aforementioned definition of stablecoins, are excluded from the scope of regulation of the Stablecoin Ordinance because they are difficult to meet the asset anchoring mechanism.
In addition, the HKMA reserves the authority to expand the scope of stablecoins. Article 4.2 of the Stablecoin Ordinance gives the Monetary Authority the power to include other digital forms of value in the scope of "specified stablecoins" through a notice published in the Gazette, so that the HKMA can dynamically adjust the scope of regulation when responding to new cryptocurrencies.
As mentioned above, the Stablecoin Ordinance stipulates two types of assets that stablecoins can be anchored to, namely official currencies and assets designated by the HKMA. In the "Regulatory Guidance Consultation Document" formulated in accordance with the Stablecoin Ordinance, the HKMA has detailed the requirements for reserve assets.
First, according to Article 2.1.1 of the "Regulatory Guidance Consultation Document", the issuer of a stablecoin must ensure that the reserve assets it anchors meet full coverage. The issuer must always maintain the market value of its reserve assets at no less than the total face value of the circulating stablecoins, and must set up a buffer based on the risk characteristics of the assets (such as credit bonds requiring more than 15% over-collateralization) to cope with market fluctuations. All assets must be denominated in the stablecoin reference currency (Hong Kong dollar stablecoins are exempted from holding US dollar assets due to the linked exchange rate system). If currency mismatch is required, the HKMA must be approved in writing in advance and risk mitigation measures such as over-collateralization must be implemented.
Secondly, reserve assets are limited to highly liquid, low-credit-risk legal financial instruments, corresponding to Article 2.2.1 of the Regulatory Guidance Consultation Document: bank deposits due within three months; tradable debt securities with a remaining maturity of no more than one year (must be issued or guaranteed by a sovereign government, central bank, qualified international organization or multilateral development bank, and meet the 0% risk weight standard stipulated in Articles 55 to 58 of the Banking (Capital) Rules, and it is absolutely prohibited to hold debt instruments issued by financial institutions and their affiliates); cash receivables from overnight reverse repurchase agreements guaranteed by high-credit-rated counterparties; investment funds established specifically for the management of reserve assets and other assets approved by the HKMA.
Finally, Article 2.4.4 of the Regulatory Guidance Consultation Document stipulates that reserve assets must be completely separated from the issuer's own assets through a statutory trust structure, and the validity of the trust must be subject to a legal opinion issued by an independent lawyer and updated in the event of major changes. The trust is held by a licensed bank or an institution approved by the HKMA, and the custody agreement must explicitly prohibit deductions from the reserve account to ensure that stablecoin holders are repaid first in the event of bankruptcy.
According to Article 14 of the Stablecoin Ordinance, the issuer of stablecoins must be a legal entity registered in accordance with the law, including a local Hong Kong company or a qualified overseas company, and must establish a substantial business presence in Hong Kong. On this basis, the "Regulatory Guidance Consultation Document" proposes more risk control measures. For example, if the issuer is a subsidiary of a group, its parent company must have financial business qualifications and be subject to unified supervision at the group level. Banks can serve as special issuers, but they must also comply with banking regulatory requirements and stablecoin-related regulations.
In terms of the amount of reserves, different entities have different reserve requirements. Non-bank issuers must maintain at least HK$25 million or equivalent in freely convertible foreign currency in paid-in capital to ensure that the capital is used completely independently for stablecoin business operations and is prohibited from flowing to related parties. Although bank issuers are exempt from this minimum capital requirement, they still need to meet the capital adequacy ratio standards stipulated by the banking industry in accordance with Article 5.1.3 of the Regulatory Guidance Consultation Document, and the capital used for stablecoin business must be strictly isolated from other assets of the bank.
It is worth noting that Article 7 of the Regulatory Guidance Consultation Document imposes restrictions on corporate governance and personnel qualifications. Issuers must establish a governance structure with checks and balances, in which at least one-third of the board members must be independent non-executive directors (INEDs). The appointment of core executives such as the CEO, the head of stablecoin business and directors must be approved in writing in advance by the Hong Kong Monetary Authority and pass a comprehensive "fit and proper" assessment, covering dimensions such as professional competence, criminal record, financial soundness and conflict of interest review. The appointment information of managers must be filed with the regulatory authorities, and their qualifications must continue to meet the requirements of their duties. All key personnel involved in stablecoin business must receive regular compliance training and behavioral supervision.
Today, as countries accelerate the implementation of stablecoin bills, Hong Kong's "Stablecoin Ordinance" still has two highlights.
First, the cross-border regulation of Hong Kong's stablecoins is the institutional highlight of the "Stablecoin Ordinance". Based on the "territorial jurisdiction" principle of traditional financial supervision, any designated stablecoin issued in Hong Kong must apply for a license to ensure that local financial activities are controlled. Hong Kong's innovation lies in breaking through geographical restrictions and extending supervision to stablecoins issued overseas. Specifically, if the stablecoins issued overseas are anchored to the Hong Kong dollar or "actively promote" the issuance of stablecoins to the Hong Kong public, they will be required to apply for a license. When the issuance of a certain stablecoin may affect "Hong Kong's monetary stability, financial stability or Hong Kong's function as an international financial center" or "involve major public interests", the Financial Supervisory Commission also has the right to supervise it and require it to fulfill its license application obligations. The "Stablecoin Ordinance" has strict cross-border regulations on the issuance of stablecoins, aiming to guide overseas issuers targeting Hong Kong, China to apply for licenses and accept supervision, so as to ensure that the security of Hong Kong's financial system and monetary sovereignty are not threatened.
Secondly, the diversification of anchored legal currencies reflects the openness of Hong Kong, China as an international financial center. As mentioned above, Hong Kong's designated stablecoins can maintain value stability by reference to one or more official currencies, and due to the existence of the linked exchange rate system (the Hong Kong dollar to US dollar exchange rate is stable at 7.75 to 7.85 Hong Kong dollars per US dollar), the reserve assets of designated stablecoins pegged to the Hong Kong dollar can be denominated in US dollars. Correspondingly, Hong Kong's stablecoins must comply with international anti-money laundering (AML) and counter-terrorism financing (CFT) standards to reduce the regulatory complexity brought about by multi-currency anchoring. The multi-currency anchoring mechanism can not only reduce the depreciation risk of a single anchored fiat currency, but also attract international investors anchored to mainstream currencies such as the US dollar and the euro, and enhance the competitiveness of Hong Kong's stablecoin market. Compared with anchoring a single currency or a sovereign asset, Hong Kong's stablecoins obviously provide a richer choice space and institutional guarantees.
Although the Stablecoin Ordinance has brought a more comprehensive stablecoin regulatory framework to Hong Kong, China, the value anchoring mechanism of crypto assets is not native here. USDT and USDC, which are anchored to the US dollar, have already gained ample practical opportunities in the global transaction settlement system. With the end of the Biden administration's high-pressure cycle on crypto assets, the GENIUS Act led by the Trump administration may provide another policy path for global stablecoin regulation.
4.1.1 Scope of application
The Act clearly defines "payment stablecoins" as a digital asset issued through distributed ledger technology, whose core function is to serve as a payment or settlement tool, and requires the issuer to promise to redeem at a fixed currency value. It is worth noting that national currencies, deposits (including deposits recorded on blockchains) and securities (such as securities defined in the Investment Company Act of 1940) are explicitly excluded.
On the technical level, the Act adopts the principle of "technological neutrality" and allows the issuance of innovative forms of stablecoins such as blockchain and smart contracts, but requires independent custody of its reserve assets and prohibits the mixing of reserve assets with the issuer's own assets to prevent the risk of misappropriation of funds.
4.1.2 Regulatory Levels
The Act establishes a layered regulatory framework of "federal-led + state-level supplements":
Federal level: The Federal Reserve, the Office of the Comptroller of the Currency (OCC) and other institutions review and issue licenses to national issuers with a market value of more than US$10 billion, requiring them to disclose details of reserve assets on a regular basis, undergo stress testing, and comply with the Bank Secrecy Act and anti-money laundering (AML) regulations.
State level: Small and medium-sized issuers (market value ≤ US$10 billion) can choose the state regulatory framework, but must ensure that it is "substantially consistent" with federal standards (certified by the Ministry of Finance).
4.1.3 Issuers and Compliance Requirements
The bill sets strict entry thresholds for issuers and clearly states that stablecoins may not provide interest income:
Three types of qualified issuers:
Subsidiaries of insured depository institutions (requires approval from the Federal Reserve);
Federal-approved non-bank entities;
State-approved entities (as mentioned above, entities with a market value of more than US$10 billion are subject to mandatory federal regulation).
For foreign issuers, the Act requires them to register in the United States and prove that "the regulatory framework of the home country is substantially comparable to that of the United States", and they must also have the technical ability to execute "lawful orders" (such as asset freezes) from U.S. courts or governments.
4.1.4 Reserve assets and transparency requirements
The Act imposes mandatory requirements on the allocation and transparency of reserve assets:
Reserve assets must be highly liquid assets: Reserves must cover 100% of the circulation volume, limited to low-risk assets such as U.S. dollar cash, Treasury bonds maturing within 93 days, and Treasury bond-collateralized repurchase agreements, and re-pledge or reuse is prohibited.
Disclosure and audit: Issuers must disclose the size, structure and custody location of reserve assets on a monthly basis, and they must be reviewed by a registered accounting firm, and the CEO/CFO must endorse the authenticity of the data. Non-listed companies with a circulation of more than US$50 billion must submit audited financial statements to ensure financial transparency.
4.1.5 Consumer protection and cross-border coordination
The bill protects consumer rights and prevents systemic risks through the following provisions:
Redemption and fee transparency: Issuers must clearly define the timely redemption procedures and redeem at par without delay.
Prohibition of political endorsement: It is prohibited to imply government endorsement in the name or marketing, and any member of Congress or senior executive branch official is prohibited from issuing payment stablecoin products during public service.
Bankruptcy priority: Stablecoin holders’ claims take precedence over other creditors, and reserve assets are independent of the issuer’s bankruptcy property, ensuring the safety of holders’ funds.
4.2 Stablecoin Regulations and GENIUS Act
Both the Stablecoin Regulations and the GENIUS Act focus on regulating stablecoins pegged to fiat currencies or other assets, and both require 100% asset coverage and segregated protection of reserve assets, and comply with international anti-money laundering (AML) regulations to avoid criminal risks. However, in specific terms, the two differ in many dimensions, and this section organizes these nuances into a table:
During the Biden administration, the Hong Kong SAR government worked hard to improve the institutional gap in the field of crypto assets, attracting more than 200 Web3 companies to set up or expand their businesses in Hong Kong, and initially forming a crypto asset ecological cluster. However, compared with the high-pressure regulation of crypto assets during the Biden administration, the Trump administration's open policy on crypto assets attempts to reconstruct the United States' leadership in this field. Although the implementation of the policy is still uncertain, Trump's strong support for crypto assets has further strengthened the market's expectations for loose regulation, which is bound to squeeze the space of Hong Kong's stablecoin market. In the face of the ever-changing international policy environment, Hong Kong can rely on the unique institutional arrangements granted by "One Country, Two Systems" to actively participate in the formulation and practice of global crypto asset rules.
In terms of reserve asset management, the Stablecoin Ordinance provides a diversified selection path. The GENIUS Act strictly limits the types of reserve assets and requires that reserve assets be concentrated on the highest quality liquid assets, which essentially forms an allocation strategy based on US bonds. US bonds have become the inevitable choice of issuers due to their perfect balance of security, profitability and liquidity, and have also deeply bound the US bond market with the cryptocurrency ecosystem. In contrast, the Stablecoin Ordinance provides global investors with more diversified value storage and payment options. Diversified reserve assets make it possible for Hong Kong to establish a stablecoin system with controllable risks and taking into account the needs of multiple currencies.
From the perspective of political positioning, Hong Kong is backed by the huge real economy system in mainland China. The long-term value of crypto assets should not be limited to financial speculation. Serving the real economy and the digitization of real assets are also important ways out. Mainland China has the most complete industrial system in the world, providing a wealth of application scenarios for the payment function of stablecoins. From international logistics, supply chain to digital asset rights confirmation, there are a large number of high-value assets with tokenization potential. Hong Kong can give full play to its institutional advantages and global resource allocation capabilities as an international financial center, build a world-leading physical asset tokenization (RWA) issuance and trading platform, and promote the efficient and compliant value transfer of high-quality assets in the mainland and the world in the Hong Kong market, thereby promoting the integration of traditional assets in the mainland with the crypto-financial system and building a more diversified crypto-asset ecosystem.
At the same time, we should also see the objective trend of the current international crypto-ecological landscape. On the one hand, the United States has significant advantages in the underlying fields such as public chain technology, encryption protocols and development tools. If some start-up projects and developers continue to choose the United States as their headquarters or R&D center, it will inevitably divert Hong Kong's talent and capital resources in the Web3 field. On the other hand, after more than a decade of evolution, the global crypto ecosystem has gradually evolved from the early "de-dollarization" to the "dollarization" pattern with the US dollar as the core. The issuance, circulation and settlement systems of mainstream stablecoins such as USDT and USDC are almost completely dominated by the United States. Against this background, the exploration of Hong Kong's stablecoin system can provide the market with different institutional paths and help promote the compliance practices of stablecoins in cross-border payments, asset tokenization and other fields.
With the implementation of the Hong Kong Stablecoin Ordinance and the US GENIUS Act, the global stablecoin regulatory landscape has officially entered the era of institutional competition. Hong Kong's regulatory framework is centered on "diversified reserves + prudent supervision", which not only provides the market with alternative options outside the US dollar system, but also promotes exploration in emerging directions such as RWA (real asset tokenization), further broadening the application possibilities of stablecoins in the real economy. In the future, as more countries introduce stablecoin regulatory bills, if Hong Kong can continue to play the role of a hub that "relies on the mainland and connects the world", it may become a key node in the new global digital financial order, providing international capital with more abundant value storage and payment options.
At the same time, the US "GENIUS Act" established a multi-layered regulatory framework with the federal government as the core, and strengthened the control of stablecoin operation risks through reserve asset requirements, audit disclosure mechanisms and issuer qualification settings. Its technology neutrality principle also leaves room for future innovation. Although the regulatory paths of Hong Kong and the United States are different, they both reflect the common pursuit of orderly and compliant development of the stablecoin market.
In short, the gradually clear stablecoin regulatory system will help repair and amplify the overall confidence of the crypto market, and the interactive relationship between regulation and the market is pushing the global crypto ecosystem into a new stage of compliant development.
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