Chinese officials have named the "offshore RMB stablecoin" as a key player. Can it help Hong Kong become a global stablecoin center?

In the context of increasingly stringent global regulations on Crypto Assets, Hong Kong is actively seeking to become a hub for virtual assets. Chinese officials recently stated that the greatest opportunity for Hong Kong to develop stablecoins lies in promoting "offshore RMB stablecoins," rather than HKD stablecoins. Officials suggested that the Hong Kong SAR government should seek central support to develop an officially certified RMB stablecoin to enhance market confidence and assist Hong Kong in becoming a global hub for stablecoin issuance. This proposal points the way for Hong Kong's future development in the stablecoin sector and has sparked deep reflection within the industry on the potential of the stablecoin market and regulatory challenges.

1. The competition for stablecoin licenses in Hong Kong is intense, and market expectations are heating up

The Hong Kong "Stablecoin Ordinance" was published in the gazette on May 30, 2025, and is scheduled to come into effect on August 1, 2025. This marks the inclusion of fiat-backed stablecoins (FRS) into a formal and institutionally regulated legal framework for activities conducted within Hong Kong, issued from outside Hong Kong, or involving Hong Kong dollars. The Secretary for Financial Services and the Treasury, Christopher Hui, stated that the Monetary Authority is currently consulting the market on the implementation of ordinance guidelines, which will be announced this month, and will involve anti-money laundering and other related requirements. He anticipates that the number of stablecoin licenses that can be granted this year will be "single digits."

According to reports from domestic media, currently, in addition to the officially announced companies such as JD.com, Standard Chartered, and Circle, more than 40 companies are preparing to submit applications, and dozens of law firms have expressed interest in applying, making the competition extremely fierce. The applying institutions are mostly the largest financial institutions and internet companies in China, while some small enterprises that intend to apply have a bleak hope. This demonstrates the market's high enthusiasm for the stablecoin license in Hong Kong and the optimistic expectations for the future development of stablecoins.

2. The Nature of Stablecoins and Regulatory Framework

Despite the current market being extremely vibrant, with major institutions vying to enter, and even the viewpoint that stablecoins will reconstruct and disrupt the international monetary system, industry insiders believe this is undoubtedly an exaggeration of the impact of stablecoins. Qiao Yide, Vice President and Secretary of the Shanghai Development Research Foundation, stated that the improvement in cross-border payment efficiency that stablecoins can achieve may not be as high as anticipated. Research indicates that the actual cost could be close to 1%, rather than the extremely low levels advertised. At the same time, stablecoins are anchored to sovereign currencies, essentially extending and diffusing the functionality of fiat currencies, and cannot disrupt the system upon which they rely.

The stablecoin regulations in Hong Kong construct a complex semantic system regarding digital value. Stablecoins are defined not only as a functional tool but also delineated from technical, economic, and legal dimensions: they must have cryptographic protection, be used as a medium for value storage or exchange, and operate on top of distributed ledger technology (DLT). "Specific stablecoins" further narrow the scope to tokens pegged to official currencies or other units approved by the Hong Kong Monetary Authority ("HKMA").

The principle of fiat currency support is at the core. The regulations clearly state that any "specific stablecoin" must be redeemable at par with its pegged fiat currency, especially the Hong Kong dollar. This is not only a mechanical requirement but also a fundamental safeguard mechanism. Fiat support ensures that stablecoins can operate as reliable monetary instruments rather than speculative Crypto Assets. The Monetary Authority requires that reserve assets must be high-quality and liquid assets (such as cash and short-term government bonds) and denominated in the same fiat currency to which the stablecoin is pegged. This measure eliminates the risk of currency mismatch, where a discrepancy between the currency of the reserve assets and the currency of the stablecoin could lead to depreciation of value.

III. Authorization Framework and Regulatory Authority

The regulation introduces a comprehensive prudential licensing system, emphasizing the systemic importance of stablecoin issuers. Key requirements include:

Capital bottom line: The minimum paid-in capital is HKD 25 million.

Reserve Structure: Issuers must maintain high-quality, liquid reserve assets corresponding to the circulating stablecoin at a 1:1 ratio.

Isolation and Legal Protection: Reserve assets must be placed in a trust or similar closed mechanism, and cannot be used for other creditors in the event of bankruptcy.

Redemption mechanism: A mechanism must be established to ensure that redemption requests are fulfilled at face value in real-time.

Governance Review: The appointment of controlling persons, directors, and stablecoin managers must be approved by the Monetary Authority.

The regulatory powers of the Monetary Authority are equipped with strong tools, including investigative authority, sanction mechanisms, management intervention, and arbitration mechanisms. The regulations clearly specify the activities that actors in the virtual asset market are prohibited from engaging in, including unlicensed operations, illegal issuance of specific stablecoins, advertising restrictions, fraud and deception, as well as inducement crimes, and clearly outline criminal liabilities.

IV. International Comparison and Hong Kong's Differentiation Positioning

Compared to the EU's Regulation on Markets in Crypto Assets (MiCA), Singapore's Payment Services Act 2019, and the state-level remittance licensing system in the United States, Hong Kong's regulations demonstrate unique regulatory choices:

Mandatory Redemption Obligation at Par Value: Hong Kong mandates immediate redemption at par value, while most jurisdictions allow for redemption delays.

Introduction of statutory management mechanisms: The rare "pre-bankruptcy intervention rights" in crypto assets legislation have been explicitly introduced in the Hong Kong ordinance.

Crossing with banking regulation: Capital requirements, reserve isolation, and "fit and proper" standards are regulatory requirements similar to those of traditional deposit institutions.

This strategy difference reflects Hong Kong's priority for stability and fiat currency anchoring, rather than merely pursuing market growth or issuer flexibility.

V. Distinction and Actual Impact of Tokenization of Real-World Assets (RWA)

A common misconception is that the regulation of stablecoins implies that RWA is also indirectly recognized. This is not the case. The regulation does not provide a direct path or legal recognition for RWA programs. Stablecoins operate within the framework of fiat currency, while RWA involves putting domestic assets (such as real estate, stocks, and bonds) into token form. The regulation emphasizes that there are still regulatory gaps for RWA, with major challenges including cross-border asset transfers and QFII restrictions. Obtaining FRS approval does not equal the legal ability to engage in RWA business.

The new regulations will fundamentally change the way virtual asset businesses operate in Hong Kong. Both issuers and investors must reassess their strategies, partners, and legal risks. Unlicensed issuance is no longer a "risk," but a criminal offense. Global platforms can no longer "incidentally" offer stablecoins in Hong Kong; they must establish dedicated compliance strategies.

Conclusion:

Hong Kong's stablecoin regulations are a strategic choice made with intention: to incorporate crypto finance into a system of accountability. By integrating licensing, regulation, and enforcement within a unified framework, Hong Kong sends a clear signal to the global market: digital finance must operate under the rule of law. Despite unresolved fractures such as how to balance AML/CFT regulation while retaining anonymity features, and how mainland capital controls interact with the cross-border circulation of HKD stablecoins or the tokenization of mainland assets, the core proposition of Hong Kong is this: the key to financial evolution is not speed, but sovereignty, stability, and systemic integrity. Only through regulation can trust be established in places where technology cannot self-validate trust. Without trust, innovation will ultimately fail.