Hong Kong Sets the Stage for Stablecoin Growth With New Licensing Law

Hong Kong has taken a major step toward solidifying its role in the digital asset economy with the passage of new legislation creating a formal licensing regime for stablecoin issuers. The law, passed on Wednesday by the Legislative Council, sets in motion a regulatory framework aimed at balancing innovation with investor protection.

Under the new ordinance, which is expected to come into effect later this year, any company issuing stablecoins—a type of cryptocurrency backed by fiat reserves like the US dollar—must obtain a licence from the Hong Kong Monetary Authority (HKMA). Only licensed firms will be permitted to advertise or distribute these tokens to the public.

HKMA Chief Executive Eddie Yue described the framework as “risk-based, pragmatic, and flexible,” emphasizing that the law is designed to foster a responsible and resilient digital finance ecosystem. “A robust and fit-for-purpose regulatory environment will enable stable, sustainable development in the sector,” Yue said in an official statement.

The law comes as stablecoins play an increasingly central role in global finance. According to a 2024 report by CEX.io, stablecoin transactions reached a staggering US$27.6 trillion—outpacing the combined volume of global credit card giants Visa and Mastercard.

Further technical details, such as rules around reserve backing, asset segregation, disclosures, and risk controls, will be released through public consultations in the coming months, the HKMA noted.

Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, said the move strengthens Hong Kong’s status as a global financial hub. “It aligns with global regulatory trends and builds a strong foundation for our virtual-asset market,” Hui said.

The government also plans to consult on over-the-counter trading and custody services for virtual assets and will issue a second policy paper outlining future directions for the sector.