On May 21, Hong Kong’s Legislative Council passed the Stablecoin Bill in its third reading—an unprecedented regulatory milestone that positions the region as the first jurisdiction globally to establish a comprehensive legal framework for fiat-backed stablecoins. With official enactment expected by the end of 2025 after the Chief Executive’s signature and gazettal, this move signals Hong Kong’s strategic ambition to become a global hub for digital finance and Web3 innovation.
Just days earlier, on May 19, the U.S. Senate advanced its own stablecoin legislation—the 2025 Generative Innovation and Uniform Stablecoin Act (GENIUS Act)—with a procedural vote of 66 to 32. While not yet finalized, this marks a significant step toward federal oversight of dollar-pegged stablecoins.
This article dissects Hong Kong’s newly passed Stablecoin Ordinance—based on the official draft (Gazette Nos. C3116–C3684)—compares it with the U.S. GENIUS Act, and explores how these two frameworks reflect divergent philosophies in regulating one of the most critical financial innovations of the digital age.
Key Provisions of Hong Kong’s Stablecoin Ordinance
The Stablecoin Bill spans 11 parts, 175 sections, and eight schedules, covering licensing, reserve management, enforcement powers, and penalties. Below are the core components shaping its regulatory backbone.
1. Definition and Scope
- Fiat-Backed Stablecoins Only: The ordinance defines regulated stablecoins as those pegged to legal tender, such as the Hong Kong dollar or U.S. dollar.
- Regulated Activities: Includes issuance, reserve asset management, and provision of stablecoin-related services, all requiring authorization.
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2. Licensing Framework
- Issuer Eligibility: Only corporations or recognized overseas institutions may apply for a license from the Hong Kong Monetary Authority (HKMA).
- Minimum Capital Requirement: Applicants must have at least HKD 25 million in registered capital, ensuring financial resilience.
- Penalties for Non-Compliance: Operating without a license or falsely claiming compliance is a criminal offense punishable by fines and imprisonment.
3. Licensee Obligations
- 1:1 Reserve Backing: Stablecoins must be fully backed by high-quality liquid assets (e.g., cash or short-term government bonds) in a 1:1 ratio.
- Mandatory Redemption Rights: Holders can redeem their stablecoins at face value at any time, enhancing consumer trust.
- Governance Requirements: Licensees must appoint an approved CEO, directors, and a dedicated stablecoin manager—roles subject to HKMA vetting.
4. Regulatory Powers and Sanctions
- The HKMA has broad authority to request information, conduct audits, and appoint statutory managers during crises.
Violations carry severe consequences:
- Unlicensed operations: Up to HKD 5 million fine and 7 years’ imprisonment.
- Fraudulent conduct: Penalties increase to HKD 10 million and 10 years’ jail time.
5. Transition Period
Existing issuers must either apply for a license or exit the market before the law takes full effect—expected within 2025.
Hong Kong vs. U.S.: A Tale of Two Stablecoin Regimes
While both jurisdictions aim to bring clarity to stablecoin markets, their approaches reflect distinct economic priorities and regulatory philosophies.
Regulatory Model & Market Vision
| Aspect | Hong Kong | United States (GENIUS Act) |
|---|---|---|
| Structure | Centralized oversight under HKMA | Dual-tier system: federal + state regulation |
| Currency Focus | Supports multi-currency stablecoins (HKD, USD, potential offshore CNY) | Exclusively promotes U.S. dollar dominance |
| Strategic Goal | Build an inclusive, international Web3 financial hub | Protect dollar hegemony and systemic stability |
Hong Kong embraces a “risk-based, innovation-friendly” model designed to attract global projects. In contrast, the U.S. prioritizes control over systemic risks posed by large-scale issuers—those with over $10 billion in circulation fall under federal supervision.
Compliance Rigor and Market Impact
- Hong Kong: Requires full reserve backing, minimum capital thresholds, and 72-hour redemption windows. These measures enhance safety but may raise barriers for smaller players.
- U.S.: Allows reserves to include short-term Treasuries and repurchase agreements, offering more flexibility. However, strict anti-foreign-currency provisions limit non-dollar stablecoins.
While Hong Kong mandates regular audits, the U.S. relies on monthly public disclosures—less rigorous oversight that could leave gaps in real-time accountability.
Consumer Protection & Global Alignment
Hong Kong enforces stronger consumer safeguards:
- Mandatory redemption rights
- Clear advertising standards
- Six-month transitional licensing window for orderly compliance
- The U.S. emphasizes AML/KYC compliance and transparency reports but offers weaker guarantees on redemption timelines and cross-border recognition.
Both frameworks uphold the principle of “same activity, same risk, same regulation,” requiring full asset coverage and prohibiting risky investments—a nod to international financial standards.
Industry Perspectives: What Experts Are Saying
On Strategic Implications
A prominent analyst noted:
“With Hong Kong passing its stablecoin law right after the U.S. GENIUS Act cleared a key hurdle, it’s clear that the race for digital monetary sovereignty has begun. Stablecoins aren’t just financial tools—they’re digital financial weapons. The infrastructure is now in place. The question is whether policymakers will dare to launch—like issuing a renminbi-based stablecoin on Ethereum. If all we get is another USD-pegged HKD stablecoin, it’s just redundant.”
Given that Hong Kong’s currency is already pegged to the U.S. dollar, creating a “stablecoin version” of a dollar proxy offers limited innovation unless extended to offshore RMB use cases.
Johnny Ng (Legislative Councilor & Web3 Advocate)
Johnny Ng emphasized long-term vision:
“This legislation is just the first step in building Web3 infrastructure. Beyond issuing stablecoins—whether HKD-backed or offshore RMB—we need to create real-world use cases: retail payments, cross-border trade, DeFi integrations. We should also explore yield-bearing stablecoins to boost adoption. By incentivizing usage through interest returns, we can expand market share and drive true financial transformation.”
His call highlights a crucial next phase: moving from regulation to utility-driven adoption.
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Why This Matters: The Rise of Digital Currency Sovereignty
As major economies move to regulate stablecoins, a new global contest is emerging—the battle for digital monetary influence.
Hong Kong’s approach reflects a broader strategy:
- Leverage its status as a semi-autonomous financial gateway
- Pilot offshore RMB stablecoins as tools for RMB internationalization
- Position itself as a neutral, rules-based platform for multi-currency digital assets
Meanwhile, the U.S. seeks to cement the dollar’s dominance in blockchain settlements, fearing erosion from foreign-backed digital currencies.
This divergence isn’t merely technical—it’s geopolitical. One path leads toward inclusive digital finance, the other toward monetary control and strategic insulation.
Frequently Asked Questions (FAQ)
Q1: When will Hong Kong’s stablecoin law take effect?
The bill has passed its third reading and awaits formal gazettal and executive approval. Full implementation is expected by the end of 2025, with a transition period allowing current issuers to apply for licenses or wind down operations.
Q2: Can individuals issue stablecoins under the new law?
No. Only licensed corporate entities or recognized foreign institutions can issue regulated stablecoins. Individual issuers are not permitted under the current framework.
Q3: Are offshore RMB stablecoins allowed under the ordinance?
While not explicitly named in the draft, the law allows stablecoins pegged to any legal tender—including foreign currencies—provided they meet reserve, audit, and licensing requirements. This opens the door for offshore RMB-pegged tokens, subject to future regulatory guidance.
Q4: How does Hong Kong’s law compare to EU’s MiCA?
Both aim for comprehensive crypto regulation, but MiCA covers a wider range of digital assets (e.g., utility tokens). Hong Kong’s ordinance is specifically focused on fiat-backed stablecoins, making it more targeted but less broad than MiCA.
Q5: Will users earn interest on Hong Kong-regulated stablecoins?
Not directly under the ordinance. However, lawmakers like Johnny Ng have advocated for interest-bearing models, suggesting future amendments could allow yield generation while maintaining reserve integrity.
Q6: Is cross-border use of Hong Kong stablecoins permitted?
Yes. The law does not restrict where stablecoins can be used. Licensed issuers may facilitate international transactions—making them potential vehicles for cross-border remittances and trade settlements.
Final Thoughts: Building Trust Through Regulation
Hong Kong’s stablecoin legislation sets a new benchmark in regulatory clarity and investor protection. By mandating full reserves, enforceable redemption rights, and robust governance, it builds trust essential for mass adoption.
Yet regulation alone isn’t enough. As industry leaders stress, success hinges on developing practical applications—from everyday payments to global trade—and potentially introducing yield mechanisms to enhance utility.
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The world is watching: Will Hong Kong become the launchpad for a new era of open, multi-currency digital finance? Or will geopolitical caution limit its ambitions? One thing is certain—the age of digital currency competition has officially begun.
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