Hong Kong’s Crypto Watershed: HKMA Tightens Grip on Stablecoins as New Law Takes Effect August 1

Hong Kong's financial regulators are drawing a line in the sand—stablecoins are officially entering the regulatory crosshairs.

The HKMA's long-awaited stablecoin framework goes live next week, forcing crypto players to play by traditional finance rules (whether they like it or not).

Buckle up for:

- Mandatory licensing for all stablecoin issuers

- Reserve requirements stricter than a Swiss private bank

- Full transparency mandates—no more algorithmic smoke and mirrors

The irony? Just as Wall Street finally warms to crypto, Hong Kong slaps it with the same red tape that made TradFi so...exciting. Happy regulating!

TLDR

• Hong Kong will start enforcing a new law on August 1 to regulate stablecoins.
• The law makes it a criminal offense to promote or offer unlicensed fiat-referenced stablecoins.
• Individuals or companies violating the law may face fines and up to six months in prison.
• The Hong Kong Monetary Authority will oversee licensing and enforcement under the new ordinance.
• More than 50 firms are expected to apply for licenses before the new law takes effect.

Hong Kong will begin enforcing a new crypto law on August 1 targeting unlicensed fiat-referenced stablecoin activities. The Stablecoins Ordinance, passed in May, introduces criminal penalties for promoting or offering such digital assets without a license. The move marks a major step in the city’s broader regulatory strategy for digital assets.

New Law Targets Unauthorized Stablecoin Activities

The Hong Kong government has authorized the Hong Kong Monetary Authority (HKMA) to oversee and enforce the new stablecoin framework. Under the law, individuals or companies promoting or offering fiat-referenced stablecoins without HKMA approval will face penalties. Offenders could receive fines up to HK$50,000 and face a maximum of six months in prison.

The new legislation defines fiat-referenced stablecoins as “specified stablecoins” and places them under strict oversight. Sections 9 and 10 of the ordinance outline the offenses and explicitly ban public offerings and advertisements without licenses. The regulations cover offering, promotion, and facilitation of transactions involving these digital assets.

Entities involved in these activities must now apply for licenses or receive exemptions from the HKMA. Without proper authorization, any promotional material or service related to such stablecoins will be considered illegal. The authorities aim to ensure only vetted and approved participants operate in the public space.

HKMA Gains Broad Enforcement Powers

Under Part 6 of the ordinance, the HKMA can impose administrative actions including monetary fines and license revocations. Section 133 authorizes pecuniary penalties, while Section 134 enables suspensions or full revocation based on the seriousness of the violations. The law also mandates public notices to expose offenders and deter repeat infractions.

This new regime gives the HKMA substantial oversight over stablecoin activities in Hong Kong. The law aims to establish a compliant financial environment while discouraging unauthorized crypto operations. These measures align with the city’s goal to develop a secure and transparent digital asset market.

The ordinance also outlines disqualification powers, allowing the HKMA to bar violators from holding executive roles in licensed firms. Regulators believe these sanctions will increase accountability among market participants. Each measure adds a LAYER of control to ensure market integrity.

Hong Kong Firms Begin Licensing Process Ahead of Deadline

Crypto firms in Hong Kong have started submitting applications to meet the new licensing requirements. Bloomberg reports that more than 50 firms are preparing to apply as the deadline nears. Authorities are expected to approve only a portion of the applications.

Guotai Junan, a state-backed brokerage, has applied after receiving a digital asset extension to its banking license. Its shares surged 300% following the extension. ChinaAMC, another major applicant, launched a tokenized yuan money market fund ahead of licensing approvals.

Both firms represent a growing trend among institutions seeking early entry into Hong Kong’s evolving digital asset space. These developments show a clear push to align with local regulations. The licensing regime confirms the city’s intention to regulate crypto activities with formal legal structures.

Hong Kong continues to position itself as a distinct digital asset hub separate from Mainland China. Despite Beijing’s crypto ban, Hong Kong has allowed crypto ETFs trading and retail access through licensed channels.