Starting from August 1, 2025, Hong Kong will officially implement a stablecoin regulatory framework, marking a key step in the global virtual asset regulation. The framework aims to establish a robust and sustainable digital asset ecosystem, but also introduces unprecedented strict regulatory requirements. Here are the ten issues that users are most concerned about.
1. Does Hong Kong's stablecoin regulation require KYC for every holder?
Yes.
This is one of the most controversial provisions in this regulation. The Hong Kong Monetary Authority (HKMA) clearly requires that unless the license holder can prove equivalent risk mitigation measures, they must verify the identity of every holder.
This means that Hong Kong's stablecoins will no longer be "pseudonymous" decentralized assets in the traditional sense, but become a "registered tool" circulating within a regulatory closed loop, which differs from the original concept of cryptocurrencies being "permissionless" and "decentralized".
2. How does Hong Kong regulate non-custodial wallets (self-hosted wallets)?
The regulatory stance is extremely strict.
The HKMA requires stablecoin issuers to identify the ownership or control of every wallet that interacts with them and impose restrictions on transactions with non-custodial wallets. For example, only allowing transfers to "reliable wallets" and setting limits. This will significantly reduce the circulation capacity of stablecoins as a free peer-to-peer (P2P) payment tool and increase the regulatory costs for issuers.
3. What is the "Travel Rule" and how is it applied in Hong Kong?
In Hong Kong, the Travel Rule is comprehensively and mandatorily applied.
Stablecoin issuers are considered financial institutions and must comply with FATF's information disclosure requirements for fund transfers, attaching initiator and beneficiary information to each virtual asset transfer. This significantly reduces users' privacy space.
4. How difficult is it to obtain a stablecoin license in Hong Kong?
The threshold is extremely high, with very limited entrants.
The HKMA states that initially, only "a few" licenses are expected to be issued. The total application cost is estimated to exceed 30 million Hong Kong dollars, including:
- License application fee (10-15 million HKD)
- Minimum paid-in capital requirement (25 million HKD or 1% of circulating total, whichever is higher)
- Technical and human resource compliance construction
The market will thus be dominated by a few large institutions with substantial capital.
5. What financial requirements must stablecoin issuers meet?
The regulatory requirements are extremely rigorous, mainly including:
- Paid-in capital: Not less than 25 million HKD or 1% of circulating total, whichever is higher
- Reserve assets: Must be high-quality, highly liquid assets, consistent with the pegged fiat currency
- 1:1 full support: No over-issuance, each stablecoin must have corresponding reserves
- Asset isolation and trust custody: Reserve funds must be isolated and held in trust
- Redemption mechanism: Users can redeem at face value within T+1, without unreasonable thresholds or fees
- Independent audit: Must regularly disclose reserve reports and accept third-party audits
6. Can holders earn interest on Hong Kong stablecoins?
No.
Regulatory provisions clearly stipulate that licensed stablecoin issuers cannot pay any interest or returns to holders. Issuers' profits mainly come from investment returns on reserve assets.
7. Are algorithmic stablecoins legal in Hong Kong?
No.
The Hong Kong regulatory framework completely prohibits stablecoins supported by algorithmic or arbitrage mechanisms, only recognizing stablecoins with 1:1 asset backing.
8. How to verify if a stablecoin has obtained a Hong Kong license?
The public can check through the HKMA's official website.
Any organization falsely claiming to have a Hong Kong stablecoin license or be in the application process is considered a criminal offense. Before the HKMA officially announces the list of permits, one should be highly cautious of any project claiming to be "approved".
9. What are the technical and operational compliance requirements for stablecoin issuers?
They must complete comprehensive technical reconstruction, including...
On-chain Transaction Analysis: Deploy blockchain analysis tools (such as Chainalysis, Elliptic) to identify suspicious activities;
Smart Contract Management Function: Contracts must support freezing and restricting illegal addresses;
Travel Rule Integration: Connect with relevant services to exchange transaction party information;
Comprehensive Risk Management Framework: Covering multiple dimensions including credit, market, liquidity, technology, operation, and reputation.
10. How does Hong Kong's regulation differ from the EU, US, Singapore, and other regions?
The Hong Kong regulatory framework has distinctive characteristics, with some requirements even exceeding global standards:
Table 3: Stablecoin KYC/AML Requirements Comparison: Hong Kong vs. EU vs. Singapore vs. US
Overall, Hong Kong seeks to build a "golden standard" system with institutional-level, systemic stability, and regulatory connectivity, aiming to attract traditional financial capital. However, the cost is sacrificing decentralization, anonymity, and openness inherent in crypto-native values, though it is not ruled out that regulations may be adjusted based on market conditions in the future.
Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
