Interpretation of the new stablecoin regulation in Hong Kong 2025: How can retail investors hold in compliance?

On August 1, 2025, Hong Kong's "Stablecoin Regulation" officially comes into effect, marking the implementation of the world's first comprehensive regulatory framework for fiat stablecoins. This article interprets the regulatory policies of the Hong Kong Monetary Authority (HKMA), guiding retail investors on how to hold stablecoins in compliance, and compares the regulatory differences between Hong Kong, Singapore, and the United States, revealing market opportunities and challenges.

Key Points of the Hong Kong Stablecoin Regulation

The Hong Kong Monetary Authority (HKMA) has established a fiat stablecoin licensing system through the "Stablecoin Regulation" to balance innovation and risk. Any institution issuing fiat stablecoins in Hong Kong or claiming to peg their value to the Hong Kong dollar must apply for a license from the HKMA and meet strict entry requirements, such as sound risk management, anti-money laundering (AML) and counter-terrorism financing (CFT) measures, as well as technical security capabilities. Initially, only a few banks or fintech companies are expected to obtain licenses. The HKMA's "Stablecoin Sandbox" program supports testing for cross-border trade and Web3 applications, with initial participants including JD Coin Chain Technology and Standard Chartered Bank. Issuers must ensure that reserve assets are sufficient, stored with regulated custodians, and regularly disclose audit reports. Stablecoins are positioned as payment tools, initially focusing on cross-border trade to reduce retail investor risks. Transition arrangements allow market participants to adjust their businesses before the regulations come into effect, ensuring compliance.

Significance for retail investors: The regulatory enhancements in Hong Kong improve market transparency and security, allowing retail investors to participate in the digital economy through compliant stablecoins, but they need to choose licensed products.

How can retail investors hold stablecoins in compliance in Hong Kong?

Retail investors in Hong Kong need to follow the steps below for Compliance to hold stablecoins:

• Choose licensed stablecoins: Prefer holding stablecoins authorized by the Monetary Authority, pegged to the HKD or other major fiat currencies, and you can check the issuer list through the Monetary Authority's official website or compliant exchanges.
• Use a compliance platform: Trade through a virtual asset trading platform (VASP) regulated by the Monetary Authority, ensuring the platform meets KYC and AML requirements.
• Focus on use and disclosure: Understand the use of stablecoins (such as cross-border payments) and the issuer's reserve audit reports to ensure value stability.
• Be wary of cross-border risks: Pay attention to the technical and Compliance challenges brought by cross-chain technology or differences in cross-border regulation.

Tip: Avoid investing in non-compliant stablecoins that claim "high returns"; prioritize transparent and regulated issuers.

Comparison of stablecoin regulations in Hong Kong, Singapore, and the United States

Hong Kong: The world's first comprehensive framework

The Hong Kong Monetary Authority has strict regulations, emphasizing reserve transparency and AML Compliance, and supports multi-currency stablecoins (such as Ethereum and Solana networks), positioning itself for the internationalization of the Renminbi and cross-border trade. The policy attracts banks and tech giants to apply for licenses, promoting Hong Kong as a digital financial hub in Asia.

Singapore: Balancing Flexibility and Prudence

The Monetary Authority of Singapore (MAS) introduced a stablecoin framework in 2023, focusing on the regulation of stablecoins pegged to the Singapore dollar, requiring issuers to hold sufficient fiat reserves. The policy is flexible, attracting global issuers such as Paxos and Circle to test payment and DeFi applications through "Project Orchid," with a high level of retail investor participation.

United States: Mature market but fragmented regulation

The United States has not yet unified the stablecoin bill, but proposals such as the "GENIUS Act" are expected to make progress in 2025. Agencies such as the SEC and CFTC require issuers to register as money services businesses (MSB) and disclose reserve assets. USDT and USDC have the largest market size, but the increasing conflict between state and federal regulations adds uncertainty.

Retail investor insights: Hong Kong has strict regulations, high security but limited choices; Singapore is flexible, suitable for diversified investments; the US market is mature but regulatory risks need attention.

Opportunities and Challenges for Retail Investors in Stablecoins

Opportunities: Hong Kong's compliant stablecoins provide retail investors with safe investment options, the global stablecoin market is growing rapidly, and the U.S. Treasury Secretary has stated that it could increase demand for $2 trillion in government bonds, with Hong Kong potentially experiencing similar expansion. Multi-chain technology reduces transaction costs and improves efficiency.

Challenges: High entry barriers in Hong Kong limit the number of issuers, leaving retail investors with fewer choices; differences in cross-border regulation increase Compliance complexity; technical vulnerabilities or poor reserve management may lead to value fluctuations.

Conclusion: How should retail investors respond to the new regulations?

The Hong Kong "Stablecoin Ordinance" provides a safe and regulated investment environment for retail investors, but requires a higher level of Compliance awareness. Retail investors should choose stablecoins authorized by the Monetary Authority and trade on regulated platforms, paying attention to use and reserve transparency. Compared to Singapore's flexibility and the maturity of the U.S. market, Hong Kong focuses on financial stability and the internationalization of the renminbi, making it suitable for prudent investments.

Action Recommendations: In the short term, focus on the list of the first batch of licensed issuers and choose compliant stablecoins; in the medium term, participate in cross-border trade or Web3 scenarios; in the long term, track the regulatory dynamics in Hong Kong, Singapore, and the United States to optimize the investment portfolio.