Introduction
On August 1, 2025, Hong Kong’s Stablecoin Issuance and Management Regime—commonly referred to as the Hong Kong Stablecoin Bill—comes into legal force. The bill represents Asia’s first comprehensive legislation governing fiat-referenced stablecoins (FRS), and its passage signals Hong Kong’s intent to become the region’s regulatory anchor for compliant digital finance.
In a recent Veritas Global post, Stablecoins, Capital Flight, and the New Legal Infrastructure, we outlined how the GENIUS Act, MiCA, the FATF, and Hong Kong are forming a four-pillar regime for global stablecoin oversight. This article builds on that framework with a focused legal analysis of the Hong Kong Stablecoin Bill, breaking down its requirements, enforcement scope, and implications for product design and cross-border issuance.
Legislative Overview: What the Hong Kong Stablecoin Bill Regulates
Passed in May 2025, the Stablecoin Bill establishes a licensing regime for fiat-referenced stablecoin issuers operating in or from Hong Kong. It does not govern algorithmic stablecoins or broader crypto-assets, but instead focuses on fiat-pegged tokens that are intended for use as a medium of exchange.
The bill is supervised by the Hong Kong Monetary Authority (HKMA) and includes parallel enforcement under the Securities and Futures Commission (SFC) for distribution and custody functions.
Who Needs a License?
Entities must obtain an FRS License if they:
- Issue fiat-referenced stablecoins accessible to Hong Kong residents
- Market or promote stablecoin products in or from Hong Kong
- Facilitate the redemption, transfer, or custody of such stablecoins
- Operate platforms enabling retail access to FRS products
Both local and offshore firms must apply if they actively serve the Hong Kong market. Licensing is not optional and includes supervisory engagement with the HKMA even before onboarding the first user.
Core Licensing Requirements
1. Full Reserve Backing
All stablecoins must be backed 1:1 by high-quality liquid assets denominated in the same fiat currency as the stablecoin. Acceptable reserve instruments include:
- Cash
- Bank deposits at authorized institutions
- High-grade short-term debt securities (e.g., Hong Kong dollar-denominated bills)
Algorithmic or partially collateralized models are not permitted under the framework.
2. Redemption Rights
Issuers must provide daily redemption at par value. Redemption terms must be disclosed to users, and redemption windows must not be excessively restrictive. Delays, limitations, or discretion-based redemptions are prohibited.
3. Segregated Custody and Trustee Arrangements
Stablecoin reserves must be held in a trustee-managed account structure. Trustees must be locally incorporated, HKMA-authorized institutions. This is designed to protect user funds and ensure clear fiduciary accountability.
4. Annual Audits and Ongoing Reporting
Issuers must conduct independent audits annually, including verification of reserve sufficiency, operational risk controls, and internal governance systems. They must also submit quarterly reserve reports and transaction summaries to the HKMA.
5. Local Management and Incorporation
Issuers must be incorporated in Hong Kong and maintain a physical office and responsible officer locally. Outsourcing of compliance or governance functions to offshore affiliates is restricted.
What Makes the HK Bill Different from GENIUS or MiCA?
| Feature | Hong Kong Stablecoin Bill | GENIUS Act (U.S.) | MiCA (EU) |
|---|---|---|---|
| Jurisdiction | Hong Kong SAR | United States | European Union |
| Regulated Tokens | Fiat-Referenced Stablecoins (FRS) | Payment stablecoins | EMTs and ARTs |
| Reserve Rules | HKD-denominated, full 1:1 backing | USD-denominated, short-term Treasuries | Fully backed in EU-approved custodians |
| Redemption Requirement | Daily, at par, no restrictions | At par, with public disclosures | Mandatory for EMTs only |
| Custodians | Trustee structure required | Custodian must be U.S.-regulated | Segregated EU-based custodian |
| Token Design | No algorithmic stablecoins | No algorithmic issuance allowed | Algorithmic stablecoins banned |
Implications for Founders and General Counsel
1. Incorporation Is Not a Workaround
Unlike some regulatory frameworks that allow representative offices or registration-lite pathways, the Hong Kong Stablecoin Bill requires full legal incorporation in the territory. This includes the appointment of a locally responsible officer with operational authority.
2. Custody Must Be Local
Stablecoin projects that use foreign trust structures or third-party custodians will not qualify. Reserves must be administered by an HKMA-authorized trustee, creating constraints on using global custodians or offshore banks.
3. Product Design Must Avoid Synthetic Pegs
The HKMA has explicitly rejected algorithmic models and will not approve hybrid, rebasing, or reserve-optional stablecoins. This closes the door on a class of token designs that may still find room in other regulatory environments.
4. Interoperability with FATF and Travel Rule Systems Is Mandatory
As a FATF-aligned jurisdiction, Hong Kong will enforce Travel Rule compliance across all VASP-connected stablecoin systems. This includes address screening, originator and beneficiary data transmission, and use of compliant routing protocols.
Strategic Positioning: When Founders Should Consider Hong Kong
Choose Hong Kong as your regulatory base if:
- You plan to issue an HKD- or RMB-pegged stablecoin
- You are focused on the Asia-Pacific institutional fintech ecosystem
- You want a regulator-backed entry point into Chinese financial infrastructure
- You have or plan to establish local team presence and infrastructure
- You need legitimacy with Hong Kong and Singaporean banking partners
What to Do Now: Legal Checklist
- Confirm regulatory classification. If your stablecoin is pegged to fiat and used for payments, licensing is mandatory.
- Assess reserve and custody compatibility. U.S. or EU reserve models may not be accepted.
- Prepare local incorporation plan. Determine incorporation, hiring, and office space timelines in Hong Kong.
- Begin trustee selection and onboarding. Only locally licensed institutions are eligible for custody.
- Draft audit and reporting systems. Prepare frameworks for financial audits, reserve attestations, and user disclosures.
Conclusion: Hong Kong Has Drawn a Line
The Hong Kong Stablecoin Bill is not a sandbox regime. It is a bank-grade licensing framework with clear supervisory expectations, structured redemption rights, and enforceable custodial protections.
For founders seeking to build stablecoin infrastructure that integrates with Asia’s capital markets, this regime offers both clarity and credibility. For general counsel, it offers the certainty of local legal presence—but also the burden of meeting institutional-grade compliance obligations.
Need help understanding what a compliant stablecoin business in Hong Kong looks like?
Veritas Global advises stablecoin issuers, fintech founders, and institutional funds on entity formation, licensing, and reserve design.
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