Hong Kong will officially implement its stablecoin regulatory framework starting August 1, 2025, marking a significant step in global virtual asset oversight. The framework aims to establish a robust and sustainable digital asset ecosystem while introducing unprecedented regulatory requirements.
Key Regulatory Highlights:
1. **Mandatory KYC for All Holders**: The Hong Kong Monetary Authority (HKMA) requires identity verification for every stablecoin holder unless equivalent risk mitigation measures are demonstrated. This transforms stablecoins into registered instruments within a regulated system.
2. **Strict Oversight of Non-Custodial Wallets**: Issuers must identify ownership or control of all interacting wallets, with restrictions on transactions involving non-custodial wallets, limiting peer-to-peer (P2P) payment capabilities.
3. **Full Application of Travel Rule**: Stablecoin issuers, classified as financial institutions, must comply with FATF’s Travel Rule, disclosing sender and beneficiary details for each transaction.
4. **High Licensing Barriers**: The HKMA anticipates issuing only a limited number of licenses, with estimated costs exceeding HKD 30 million, including application fees, capital requirements, and compliance infrastructure.
5. **Rigorous Financial Requirements**: Issuers must maintain 1:1 reserve backing, high-quality liquid assets, segregated trust accounts, and T+1 redemption mechanisms, alongside independent audits.
6. **No Interest Payments**: Licensed issuers are prohibited from offering interest or yields to holders.
7. **Algorithmic Stablecoins Banned**: Only asset-backed stablecoins are permitted.
8. **Public License Verification**: The HKMA will publish a list of licensed issuers; false claims are criminal offenses.
9. **Technical Compliance**: Issuers must deploy blockchain analytics, smart contract controls, and comprehensive risk management systems.
10. **Global Comparison**: Hong Kong’s framework exceeds standards in the EU, Singapore, and the U.S., prioritizing institutional stability over crypto-native principles like decentralization.
This ‘gold standard’ approach targets traditional financial capital but may evolve as the market adapts.
