Hong Kong, China Special Administrative Region has issued updated regulatory guidance for Electronic Payment Services, including oversight of digital currency systems and fraud notifications, as part of broader financial stability measures
Hong Kong’s financial regulator has set new rules for companies issuing digital currencies tied to traditional money, requiring them to obtain a licence before selling such products to the public.
The framework, published by the Hong Kong Monetary Authority (HKMA), takes effect on 1 August 2025 and covers all firms that issue stablecoins—digital tokens designed to hold a steady value by being backed by assets like cash or government bonds. The move comes as part of broader efforts to curb financial crime and protect consumers in one of Asia’s largest digital asset markets.
The rules apply to any company selling stablecoins in Hong Kong, regardless of where it is based. Firms already operating in the city have until 30 September 2025 to submit licence applications or risk being shut down. The HKMA said in a statement that it would begin reviewing applications immediately but warned that no licences had yet been granted.
Who must comply and what they must do
Any firm issuing stablecoins in Hong Kong must now hold a licence from the HKMA. The rules cover both new entrants and existing operators, including those offering stablecoins backed by foreign currencies or commodities. Companies that fail to apply by the deadline face fines of up to HK$100,000 (US$12,800; £9,900) and six months in jail1.
Who must comply and what they must do
The licence requires firms to hold reserves equal to the value of all stablecoins in circulation. These reserves must be held in low-risk assets, such as cash or short-term government bonds, and must be audited at least once a year. Firms must also disclose their reserve holdings publicly every month1.
The HKMA has set a transition period for existing stablecoin issuers, allowing them to continue operating while their applications are reviewed. However, the regulator warned that firms making false claims about their licence status could face criminal charges1.
How the rules differ from earlier proposals
The final framework follows a two-year consultation process, during which the HKMA received feedback from over 100 industry participants. The most significant change from earlier drafts is the removal of a requirement for stablecoin issuers to be locally incorporated. Foreign firms can now apply for licences, provided they appoint a Hong Kong-based representative1.
Earlier drafts versus the final framework
| Question | Earlier proposals | Final framework |
|---|---|---|
| Who may be licensed | Locally incorporated issuers only | Foreign firms with a HK representative |
| Scope of oversight | All crypto-related services | Stablecoin issuance and AML controls only |
| Trading platforms | Brought under the same regime | Separate regulations |
The rules also narrow the scope of regulated activities. While earlier proposals suggested bringing all crypto-related services under oversight, the final version focuses only on stablecoin issuance and related anti-money laundering controls. Other digital asset services, such as trading platforms, remain subject to separate regulations1.
The HKMA said the changes were made to balance innovation with risk management. It noted that stablecoins, unlike other cryptocurrencies, pose unique threats to financial stability because of their potential use in large-scale payments and cross-border transactions1.
What happens to firms already operating
Companies that issued stablecoins in Hong Kong before the rules were announced must apply for a licence by 30 September 2025 or cease operations. The HKMA has set up a "sandbox" programme to help firms test their compliance systems before submitting formal applications1.
What unlicensed firms face
The regulator has not named any firms currently operating under the sandbox, but industry estimates suggest at least a dozen companies could be affected. These include both local start-ups and international players with Hong Kong-based users. The HKMA said it would prioritise applications from firms that can demonstrate strong risk controls and transparent reserve management1.
Firms that continue operating without a licence after the deadline could face enforcement action, including fines and public censure. The HKMA warned that it would monitor the market closely and take action against any firm making misleading claims about its regulatory status1.
How this fits with Hong Kong’s broader financial rules
The stablecoin rules are part of a wider push by Hong Kong to position itself as a regulated hub for digital assets. In 2023, the city introduced licensing for crypto trading platforms, requiring them to meet strict anti-money laundering and investor protection standards. The stablecoin framework extends these requirements to issuers, closing a gap that regulators feared could be exploited by fraudsters1.
The move also aligns with global efforts to regulate digital currencies. The Financial Action Task Force (FATF), an international watchdog, has called for stricter oversight of stablecoins to prevent their use in money laundering and terrorism financing. Hong Kong’s rules go further than many jurisdictions by requiring monthly reserve disclosures and annual audits2.
The HKMA said the new framework would complement existing financial crime laws, including the Anti-Money Laundering and Counter-Terrorist Financing Ordinance. Under that law, banks and payment firms must already verify customer identities and report suspicious transactions. The stablecoin rules extend these obligations to digital asset issuers, requiring them to conduct due diligence on users and monitor transactions for signs of illicit activity3.
What comes next for electronic payment services
The HKMA will begin accepting licence applications on 1 August 2025, with the first approvals expected by the end of the year. The regulator said it would publish a list of licensed stablecoin issuers on its website, allowing consumers to verify which firms are authorised to operate in Hong Kong1.
The timetable for stablecoin licensing
| Date | Who it catches | What falls due |
|---|---|---|
| 1 Aug 2025 | All stablecoin issuers | Rules take effect; HKMA begins accepting applications |
| 30 Sep 2025 | Firms already operating | Licence application or shutdown |
| End of 2025 | First applicants | First approvals; licensed issuer list published |
| After two years | The framework itself | Review; possible extension to DeFi platforms |
The rules will be reviewed after two years to assess their impact on the market. The HKMA said it would consider expanding the framework to cover other digital asset activities, such as decentralised finance (DeFi) platforms, if risks emerge. It also plans to work with other regulators in the region to harmonise stablecoin rules, reducing compliance burdens for firms operating across borders1.
For now, the focus remains on ensuring a smooth transition for existing operators. The HKMA has urged firms to begin preparing their applications early, warning that incomplete submissions could face delays. It has also advised consumers to be cautious when dealing with unlicensed stablecoin issuers, noting that they will have no recourse if a firm collapses or engages in fraud1.
Sources
- ↩ HKMA Implements Regulatory Framework for Stablecoin Issuers https://www.hkma.gov.hk/gb_chi/news-and-media/press-releases/2025/07/20250729-4/
- ↩ FATF Launches Public Consultation on Payment Transparency Guidance https://eservices.customs.gov.hk/MSOS/downloadFile?id=496814
- ↩ Monetary Authority Condemns Shanghai Commercial Bank for Money Laundering and Terrorism Financing Violations https://www.hkma.gov.hk/gb_chi/news-and-media/press-releases/2018/08/20180817-5/