HK Stablecoin Major Test "Score Release" Imminent — Who Can "Make It" Ashore in One Battle?

Written by: Xiao Sa Legal Team

Recently, the Hong Kong Monetary Authority and the Legislative Council have sent clear signals that the first batch of stablecoin licenses is entering the final review stage, with official issuance expected before the end of March. As soon as the news broke, it instantly flooded the crypto community. It’s important to note that previously, the biggest confusion in the crypto world was the lack of regulations in the stablecoin sector—either operating without licenses at the risk of legal issues or wanting to enter the market but lacking clear regulatory guidance, watching opportunities slip away helplessly.

Since the Stablecoin Ordinance took effect in August 2025, Hong Kong has been actively advancing license approvals. The upcoming issuance of the first batch of licenses aims to address the chaos and regulatory ambiguity in the stablecoin industry, establishing clear procedures for license applications, compliant operations, and risk management. Today, the Xiao Sa team will discuss the current situation of Hong Kong’s first stablecoin licenses, the practical effects after issuance, and the opportunities and pitfalls for industry practitioners and investors. Let’s explore in detail.

1. Why is Hong Kong accelerating the issuance of stablecoin licenses?

First, it’s essential to clarify Hong Kong’s regulatory stance and scope for stablecoins. The Stablecoin Ordinance is a formal local regulation, and the issuance of the first licenses is a key step in implementing this law. Its core purpose is to define a compliant framework and unify regulatory standards for stablecoin issuance and operation within Hong Kong. The HKMA will conduct approval and supervision based on this.

It’s worth noting that these licenses currently only apply to institutions registered and operating in Hong Kong. Mainland China cannot directly apply for them yet. However, Hong Kong’s regulatory practices have already provided valuable references for nationwide exploration of stablecoin compliance.

Additionally, license issuance is a practical necessity to break free from compliance dilemmas in the industry. Previously, the stablecoin sector faced issues like unlicensed issuance, reserve mismanagement, and money laundering risks, with no clear rules from regulators or markets. Hong Kong’s strict approval process filters compliant entities and clarifies core requirements such as issuance, reserves, and anti-money laundering, solving the ambiguity of “who can do it and how” and providing clear compliance guidance for the industry.

2. Hong Kong officials: the first batch of licenses will be officially issued by the end of March!

(1) Compliance of underlying assets

According to Hong Kong Radio on February 11, Chief Executive John Lee said that the HKMA is actively processing stablecoin issuer license applications, and the first batch is expected to be issued next month.

On February 25, Financial Secretary Paul Chan explicitly stated in the 2026 Budget that Hong Kong will issue the first fiat-backed stablecoin licenses in March. The consistent statements from both the Chief Executive and the Financial Secretary demonstrate Hong Kong’s high regard for stablecoin license issuance, making the timing no longer speculation but an official, confirmed plan.

HKMA Chief Executive Eddie Yue previously emphasized that only a “very limited number” of licenses will be issued initially, adhering to the principle of “prudence first, avoid rushing.” This clearly indicates that the core of this approval process prioritizes quality over quantity—regulators will not lower standards to increase market participation but will focus on risk control. The Xiao Sa team predicts that the initial licenses will be granted to a small number of institutions with mature risk management systems, good market reputation, and effective anti-money laundering compliance.

Many in the crypto community speculate that Standard Chartered and HSBC will be among the licensees. While not officially confirmed, these guesses are plausible since both banks are issuers of Hong Kong dollar notes and have established mature systems for reserve management, liquidity, and currency trust—highly aligned with the reserve management requirements for stablecoins.

From an approval perspective, Hong Kong’s stablecoin licensing process essentially transfers traditional financial prudence standards into the digital finance sector. It requires institutions to meet hard indicators like capital adequacy, reserve assets, and redemption mechanisms, as well as soft skills such as risk management, AML systems, and corporate governance. The licensed entities will set the benchmark for compliance in Hong Kong’s stablecoin market.

3. What impacts will the first batch of licenses bring?

The approval of issuers will end the chaotic, unlicensed stablecoin market, making compliance the only survival principle. Bank-affiliated institutions, with their mature capital, risk control, and regulatory trust, will dominate the market landscape. Unlicensed entities will be forced to exit or transform into supporting services, with unlicensed operations facing significantly higher risks.

Legally compliant issuance of stablecoins will effectively address the global regulatory vacuum and risks in the stablecoin market, injecting strong confidence. Issuers must strictly follow the requirements of the Stablecoin Ordinance, including a minimum paid-up capital of HKD 25 million, 100% high-quality liquid reserves, customer due diligence, and T+0 redemption. Reserves will be independently held and subject to real-time audits, eliminating issues like reserve falsification and fund misappropriation common in offshore stablecoins. These standards greatly enhance investor and institutional confidence, attracting global digital finance resources to Hong Kong and laying the foundation for large-scale stablecoin adoption.

Strict regulation will also prevent industry misconduct such as reserve fraud, providing market reassurance. The HKMA’s rigorous standards for reserve assets and disclosure will significantly boost safety perceptions among investors and practitioners, drawing more global digital financial resources to Hong Kong. In the future, compliant stablecoins will gradually break down barriers between traditional finance and digital assets, becoming mainstream tools for cross-border payments and institutional settlements, opening new development avenues.

Furthermore, license issuance will promote deeper integration of stablecoins with traditional finance and the Web3 ecosystem, especially in cross-border payment scenarios. The compliant issuance of stablecoins not only enhances Hong Kong’s position as a global digital finance hub but also provides a model for international regulation. Hong Kong will become the world’s first major financial center to fully implement a legal stablecoin regulatory framework, forming a regulatory tripartite with the US and Europe, consolidating its role as Asia’s digital asset center.

Under the “One Country, Two Systems” framework, Hong Kong’s “prudent and inclusive” regulatory approach offers a reference for domestic digital finance regulation, clarifying compliance boundaries for practitioners. It also positions Hong Kong as a key window for domestic industry compliance transformation and global market access, promoting the healthy, efficient, and trustworthy development of digital finance.

4. How should different entities respond to compliance?

Having understood the impacts of license issuance, let’s discuss practical strategies for different stakeholders—investors, Web3 companies, and traditional financial institutions—to position themselves within the compliance framework, seize opportunities, and avoid pitfalls.

(1) Ordinary investors: use compliant products rationally, avoid cross-border risks

For ordinary investors, the core principle is “stay away from unlicensed, choose licensed.” After the HKMA publishes the list of licensed institutions, investors should prioritize stablecoins issued by bank-affiliated entities, which are backed by banking credit, with transparent reserves, guaranteed redemption mechanisms, and regulatory safety nets. Remember the “risk on your own” principle—avoid blindly speculating on stablecoins. Their primary value lies in payments and settlements, not speculation, so investors should view their investment potential rationally.

Additionally, investors must be vigilant about cross-border compliance risks. According to the joint notice by the People’s Bank of China and other authorities on preventing virtual currency risks, stablecoins do not have legal tender status and cannot be used as currency for circulation. Domestic transactions and intermediary services related to stablecoins remain illegal financial activities. Using RMB to buy Hong Kong stablecoins and then exchanging foreign currency abroad may be deemed an attempt to evade foreign exchange controls, violating laws on “ disguised foreign exchange trading,” and could lead to criminal charges. Remember: “compliance” is territorial—Hong Kong licenses do not exempt one from mainland China’s foreign exchange regulations. Cross-border “double trading” will face strict legal penalties.

(2) Web3 companies: abandon independent licensing, shift to cooperation

For Web3 companies unable to obtain licenses initially, the best response is to participate in stablecoin sandbox testing to gain compliance experience or to cooperate with licensed institutions by providing technical support and scene development, leveraging their compliance credentials to operate legally.

For example, cross-border payment-focused Web3 firms can partner with licensed banks to support stablecoin-based cross-border payments; digital asset custody firms can collaborate with licensed institutions to offer compliant custody services. This approach avoids the risks of unlicensed operations and shares the benefits of industry growth, making it the optimal choice for small and medium-sized Web3 enterprises.

(3) Traditional financial institutions: seize early opportunities and deploy application scenarios

Traditional financial institutions, especially banks, are the biggest winners in this first wave of stablecoin licenses. They should leverage their capital, risk control, and customer base to accelerate stablecoin license applications. Once licensed, they should quickly develop stablecoin use cases such as cross-border payments, institutional settlements, and asset tokenization, to maximize the value of stablecoins as financial infrastructure.

Non-bank financial institutions like brokerages and asset managers can form joint ventures with banks to jointly apply for licenses or cooperate with licensed banks to expand stablecoin-related services. For instance, asset managers can develop digital asset wealth management products based on licensed bank stablecoins; brokerages can provide compliant trading channels for stablecoins, achieving mutual benefits. All traditional financial entities must also strictly avoid offering stablecoin exchange or trading services to mainland Chinese residents to stay within regulatory boundaries.

Conclusion

The issuance of Hong Kong’s first stablecoin licenses marks not the end but the beginning of compliant development in the industry. It signifies a move away from “license-free chaos” toward “regulation-led” growth, offering hope for industry practitioners to develop within a compliant framework.

It’s worth noting that many users are accustomed to offshore stablecoins like USDT, and migrating to compliant stablecoins involves costs and challenges. This is a key obstacle in early promotion. However, as the compliant stablecoin ecosystem matures, expands its use cases, and user education deepens, this migration difficulty is expected to diminish. The market acceptance of compliant stablecoins will gradually increase, truly achieving a win-win situation for digital financial innovation and financial security.