Hong Kong Tightens the Leash: New Law Puts Fiat-Pegged Stablecoins Under Regulatory Scrutiny
Hong Kong just dropped the regulatory hammer—stablecoins pegged to traditional currencies now face strict oversight. The move aims to curb volatility and protect investors, but skeptics wonder if it’s just bureaucracy playing catch-up with crypto’s wild west.
Key details: The law mandates licensing for issuers, reserves audits, and disclosure rules. No more fly-by-night operators—unless they enjoy court dates.
Bottom line: Another step toward legitimacy, or another hurdle for innovation? Either way, traders might want to brace for paperwork—and maybe a few less ’stable’ coins in circulation.
Embracing crypto
The law is part of Hong Kong’s efforts to rehabilitate its crypto reputation and encourage the growth of the industry after the collapse of fraudulent exchange JPEX in 2023.
Occurring just as Hong Kong pivoted to embracing crypto after years of hesitation, authorities are now attempting to strike a difficult balance between encouraging innovation in digital assets while ensuring retail investors are shielded from abuse.
Under the new regime, only licensed institutions can issue an FRS in Hong Kong, and only licensed offerings may be marketed to retail investors.
Unauthorized advertisements will be banned, even during the six-month grace period before enforcement begins. The HKMA will consult further on detailed requirements.
The market for stablecoins in Hong Kong remains modest compared to global volumes.
"The new bill gives issuers something tangible: clarity on licensing, redemption obligations, reserve requirements, and a framework that’s friendly to traditional finance," Justin d’Anethan, head of sales at token advisory firm Liquifi, told Decrypt. "But let’s be candid, Hong Kong remains a smaller node in global stablecoin activity."
Tether continues to be the preferred cryptocurrency in the numerous OTC trading shops in Hong Kong. At the same time, U.S. dollar-backed assets in American markets remain the leading force in the stablecoin sector worldwide.
Hong Kong’s legislation comes as the U.S. Senate advances its own stablecoin bill. The GENIUS Act, which recently cleared a key procedural vote, WOULD create a nationwide legal framework for issuing stablecoins in the U.S. The act must still pass the House before reaching President Trump, who is expected to sign it into law.
"For a while, Hong Kong, Singapore, and to some extent Dubai, held the crown when it came to forward-leaning crypto policy. But the last six months flipped the script," d’Anethan said. "The U.S., long seen as adversarial, became the unexpected epicenter of pro-crypto regulatory momentum."
Hong Kong’s stablecoin ordinance is expected to come into effect later this year, with transitional provisions to help issuers adjust to the new regime.
Edited by Sebastian Sinclair
