Hong Kong Stablecoins Ordinance 1 August 2025 - A Chatpdf Summary & Implications
- FUTURE COMPLIANCE JOURNAL
- Aug 5
- 4 min read
The widely anticipated Hong Kong Stablecoins Ordinance came into effect on 1 August 2025.
See HKMA's page for full details:
Using Chatpdf we were able to create a quick summary of the requirements from which we were able to assess its implications.
Stablecoins Ordinance: Supervision of Licensed Stablecoin Issuers
This document provides guidance on meeting the minimum criteria in Schedule 2 of the Stablecoins Ordinance (SO) for licensed stablecoin issuers .
It outlines the HKMA's expectations for licensees, focusing on ongoing compliance with the SO .
The guidelines are subject to review and amendment .
Reserve Assets Management
Licensees should have policies and procedures for managing reserve assets, including governance, measures for fulfilling requirements, and stringent operational controls .
Licensees must ensure the market value of reserve assets backing each specified stablecoin type is always at least equal to the par value of outstanding stablecoins .
Reserve assets must be of high quality and liquidity with minimal investment risks, held in forms such as cash, bank deposits (term ≤ 3 months), or marketable debt securities issued/guaranteed by governments/central banks .
Issuance, Redemption and Distribution
Licensees should establish policies and procedures for the issuance, redemption, and distribution of specified stablecoins, with clear governance and stringent controls .
Issuance of stablecoins must be prudent and sound, only to customers, and the minting of stablecoins must be matched by an increase in the relevant reserve assets pool .
Licensees must provide specified stablecoin holders with a right to redeem stablecoins at par value, including rights to direct disposal of reserve assets or claim for shortfalls in case of insolvency .
Business Activities
Licensees must obtain the Monetary Authority’s consent before engaging in any business activity other than a licensed stablecoin activity .
If a licensee wants to issue more than one type of specified stablecoin, they should demonstrate adequate capabilities and resources to the HKMA .
Licensees must adopt a strategy that aligns with the principle of ensuring the soundness and reliability of the specified stablecoins it issues .
Financial Resources
Licensees must have sufficient financial resources to maintain licensed stablecoin activities and meet obligations, including an orderly exit .
Licensees must maintain a paid-up share capital of at least HK$25,000,000 (or equivalent) .
Licensees should maintain sufficient liquid net assets funded by equity to meet its obligations .
Risk Management
Licensees must have risk management policies and procedures commensurate with the scale and complexity of their activities .
Licensees should establish risk governance arrangements with well-defined responsibilities for the Board, senior management, and different functions, following a three-lines-of-defense model .
Licensees should establish a risk management framework for identifying, assessing, monitoring, reporting, controlling, and mitigating risks, including credit, liquidity, market, technology, operational, and reputation risks .
Corporate Governance
A licensee should establish a sound corporate governance framework with a clear allocation of responsibilities and accountabilities .
A licensee should ensure that all directors, senior management, and other key personnel are fit and proper to perform their duties .
Business Practices and Conduct
Licensees must have robust information and accounting systems .
Licensees should regularly disclose relevant information to the public and report to the HKMA .
Licensees must comply with personal data protection regulations and establish effective complaints handling procedures.
The implications for businesses operating as licensed stablecoin issuers under this HKMA guidance are significant, requiring comprehensive compliance across governance, risk, operational, and financial domains:
Robust Governance and Risk Management:
Businesses need to establish clear governance frameworks with well-defined responsibilities across the Board, senior management, and control functions, following a three-lines-of-defense model.
They must develop and maintain detailed risk management policies that address credit, liquidity, market, operational, and reputational risks, ensuring these are proportional to their activities .
Capital and Liquidity Requirements:
Businesses must maintain a minimum paid-up share capital of HK$25 million (or equivalent), as well as sufficient liquid assets funded by high-quality equity to meet obligations and facilitate orderly wind-downs if necessary .
Reserve Asset Management:
They are required to hold high-quality, liquid assets backing the stablecoins, ensuring the market value of reserves always covers the issued stablecoins at par value.
Asset management policies must prioritize safety and liquidity, with compliance monitored by the HKMA .
Operational Prudence in Issuance and Redemption:
The process of issuing and redeeming stablecoins must be efficient, prompt, and prudently managed, ensuring minting is matched by reserve assets and that holders have at least the right to redeem at par value .
Compliance and Monitoring in Product Offerings:
Businesses need to implement controls over customer onboarding, conduct thorough due diligence, and verify the legality of activities in all relevant jurisdictions.
Issuing multiple types of stablecoins requires demonstrating adequate capacity to manage the complexity and ensuring issuance does not adversely impact existing operations .
Handling of Business Activities and Third Parties:
Any “Other Business Activities” require HKMA approval, with clear governance, risk controls, and conflicts of interest management.
For third-party entities involved in issuance or liquidity provision, thorough due diligence and compliance with laws/regulations are essential to mitigate legal and operational risks .
Operational Controls and Market Conduct:
Implement security measures like VPN detection to prevent location spoofing during customer onboarding and ongoing operations .
Maintain proper internal controls, disclosure, and data protection standards to uphold transparency and protect stakeholder interests .
Continuous Compliance and Supervision:
Regular reporting, audit, and adherence to evolving regulatory expectations are mandatory, requiring ongoing internal reviews and potential adjustments to operational practices .
Overall, businesses must develop a comprehensive compliance, risk, and operational framework aligned with HKMA’s prudential standards. Failing to meet these requirements could result in licensing issues, regulatory sanctions, or operational disruptions, emphasizing the need for proactive governance, strong controls, adequate resources, and continuous regulatory engagement.
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