Hong Kong Stablecoin Bill: Promoting Financial Innovation and Regional Development

On May 21, 2025, the Legislative Council of the Hong Kong Special Administrative Region passed the "Stablecoin Ordinance Draft," becoming the first jurisdiction in the world to establish a comprehensive regulatory framework for fiat stablecoins. This legislative action provides a clear legal framework for the virtual asset industry in Hong Kong while balancing financial innovation and risk control, having a profound impact on the development of the virtual currency industry in Hong Kong and mainland China.

1. Positive Impact on Hong Kong's Virtual Currency Industry

(1) Strengthen Hong Kong's position as a global digital asset center

The passage of the "Stablecoin Regulatory Draft" further consolidates Hong Kong's leadership position in the global digital asset market. The bill clarifies the regulatory requirements for stablecoin issuers, including a registration capital threshold of HKD 25 million, a 1:1 reserve asset backing for the issuance volume, and mandatory guarantees for unconditional redemption rights, among others. These strict yet clear regulatory standards provide a transparent compliance environment for the stablecoin market, helping to attract global investors and businesses to choose Hong Kong as the operational center for stablecoin activities.

The Hong Kong Monetary Authority plans to quickly issue regulatory guidelines after the bill is passed and open license applications by the end of 2025. This will attract active participation from enterprises, including multiple financial institutions, accelerating the development and application of the Hong Kong dollar stablecoin. The launch of the Hong Kong dollar stablecoin will not only enhance Hong Kong's competitiveness in the cross-border payment sector but also promote the development of the Web3 ecosystem, injecting new vitality into Hong Kong's digital economy. For example, the Hong Kong dollar stablecoin can be used for efficient and low-cost cross-border trade settlement, further consolidating Hong Kong's position as a financial hub in Asia.

(2) Promote financial innovation and technological development

The passage of the "Stablecoin Regulation Draft" indicates that the Hong Kong government views stablecoins as an important component of digital financial infrastructure rather than a marginal technology. The bill provides a clear compliance pathway for stablecoin issuers, encouraging companies to innovate within the regulatory framework. For example, some large technology companies have entered the "sandbox" testing phase for stablecoins in Hong Kong, demonstrating business confidence in the Hong Kong market. This "regulatory sandbox" mechanism allows companies to test innovative products in a controlled environment, reducing compliance costs for startups while providing space for technological iteration.

Stablecoins, as a core component of decentralized finance (DeFi), will promote further development in areas such as Web3, NFTs, and the metaverse with their legalization. Since 2022, the Hong Kong government has begun to layout virtual asset regulation, initiated public consultations in 2023, and plans to launch a regulatory sandbox in 2024, demonstrating long-term support for the Web3 ecosystem. The passage of the bill will further stimulate the application of blockchain technology in payment, settlement, supply chain finance, and other fields, creating a vibrant digital asset ecosystem in Hong Kong.

(3) Enhance market confidence and investor protection

The virtual asset industry is facing a crisis of trust due to some past events. Hong Kong has effectively reduced market risks by establishing a comprehensive regulatory framework for stablecoins, emphasizing reserve asset management, liquidity, and anti-money laundering (AML) requirements. These measures ensure the sustainability of stablecoin issuers' business models while providing investors with higher security guarantees. For example, the mandatory 1:1 reserve asset requirement and unconditional redemption rights can effectively prevent the risks of stablecoin decoupling and enhance market trust in stablecoins.

In addition, Hong Kong's regulatory framework seeks a balance between innovation and protection, demonstrating an open and compatible attitude. This balance not only attracts the attention of global crypto companies but also provides local retail investors with safer investment channels. For example, some banks have taken the lead in launching virtual asset trading services, supporting Bitcoin and Ethereum transactions, with potential further expansion to stablecoin trading in the future. This first-mover demonstration effect will encourage more financial institutions to enter the virtual asset market, expanding Hong Kong's investor base.

(4) Promote cross-border payment and financial interconnectivity

Stablecoins have the advantages of low cost and high efficiency in cross-border payments, and the stablecoin legislation in Hong Kong lays the foundation for the widespread use of Hong Kong Dollar stablecoins. The launch of the Hong Kong Dollar stablecoin will optimize financial connectivity between Hong Kong and other regions in Asia, especially in the context of the "Belt and Road" initiative and the Guangdong-Hong Kong-Macao Greater Bay Area development. For instance, the Hong Kong Dollar stablecoin can be used for cross-border e-commerce, trade settlement, and supply chain finance, reducing transaction costs and enhancing settlement efficiency. This not only helps Hong Kong solidify its position as a global trade center but also provides local businesses with more digital financial tools.

2. Positive Impact on the Cryptocurrency Industry in Mainland China

(1) Providing regulatory experience references for the mainland

The regulatory attitude towards virtual currencies in mainland China is relatively strict, prohibiting cryptocurrency business transactions and ICOs, but it holds an open attitude towards blockchain technology. The passage of the "Stablecoin Regulation Draft" in Hong Kong provides a regulatory model that can be referenced by the mainland. Hong Kong's regulatory framework emphasizes a balance between compliance, risk prevention, and financial innovation, which aligns to some extent with the mainland's policy objectives of promoting the application of blockchain technology in the financial sector (such as digital RMB).

For example, Hong Kong's "regulatory sandbox" mechanism provides a testing environment for stablecoin issuance, and this model may inspire the mainland to explore similar pilot mechanisms in specific fields such as central bank digital currencies (CBDC) or supply chain finance. As a bridge between the mainland and international markets, Hong Kong's successful experiences may promote the gradual relaxation of regulatory restrictions on stablecoins and other virtual assets in the mainland in the future, especially in the area of stablecoins pegged to the Hong Kong dollar or Renminbi.

(2) Promote the internationalization of the Renminbi

Hong Kong's stablecoin legislation provides a testing ground for non-US dollar stablecoins (such as those pegged to the Hong Kong dollar or the Renminbi). Although current stablecoin regulation in Hong Kong mainly focuses on Hong Kong dollar stablecoins, its open regulatory attitude offers possibilities for exploring Renminbi stablecoins. As an offshore center for the Renminbi, Hong Kong has a mature financial infrastructure and an international market environment, making it suitable as a testing ground for Renminbi stablecoins. If Renminbi stablecoins succeed in Hong Kong, it will further promote the use of the Renminbi in global payments and settlements, aiding the internationalization process of the Renminbi.

For example, the stablecoin regulatory framework in Hong Kong may provide compliant channels for mainland enterprises to issue RMB-pegged stablecoins in Hong Kong for cross-border trade and investment. This model not only enhances the international acceptance of the RMB but also provides mainland enterprises with new financing and payment tools, strengthening their competitiveness in the global market.

(3) Promote the coordinated development of financial technology in the Guangdong-Hong Kong-Macao Greater Bay Area

The Guangdong-Hong Kong-Macao Greater Bay Area is an important region for the application of financial technology and blockchain technology in mainland China. Hong Kong's stablecoin legislation provides new opportunities for the coordinated development of fintech in the Greater Bay Area. For example, the Hong Kong dollar stablecoin can complement the digital RMB, jointly serving the cross-border payment, trade financing, and supply chain finance needs of the Greater Bay Area. Hong Kong's regulatory experience and mature financial market can provide compliance guidance for Greater Bay Area enterprises, attracting more mainland tech companies to enter the international market through Hong Kong.

In addition, virtual asset trading platforms and stablecoin issuers in Hong Kong may collaborate with mainland enterprises to develop blockchain-based financial products. For example, stablecoins can be used in supply chain finance platforms in the Greater Bay Area to address the financing difficulties faced by small and medium-sized enterprises. This cross-regional cooperation will promote the integration and development of the financial technology ecosystem in the Greater Bay Area.

(4) Indirectly Stimulating the Application of Blockchain Technology in the Domestic Market

Although the mainland holds a cautious attitude towards cryptocurrency trading, blockchain technology has been widely applied in areas such as supply chain finance, cross-border payments, and digital identity verification. Hong Kong's stablecoin legislation provides a successful case for the commercialization of blockchain technology, which may indirectly stimulate mainland enterprises to accelerate the research and application of blockchain technology within a compliance framework. For example, Hong Kong's stablecoin "sandbox" testing experience can offer technical references for mainland enterprises, promoting the implementation of blockchain in the fintech sector.

3. Future Trends and Outlook

The passage of the "Stablecoin Regulation Bill" in Hong Kong marks a new phase in global stablecoin regulation. In the future, Hong Kong may become a global testing ground for non-US dollar stablecoins, attracting more international companies to its market. At the same time, Hong Kong's regulatory model may provide a reference for other countries and regions, promoting the coordination and development of global stablecoin regulation.

For mainland China, Hong Kong's successful experience may encourage regulators to gradually relax restrictions on virtual assets in the future, especially in areas related to the internationalization of the Renminbi. Mainland enterprises can participate in the global digital asset market through compliant channels in Hong Kong, enhancing their international competitiveness. In addition, fintech cooperation between Hong Kong and the mainland will be further deepened under the framework of the Guangdong-Hong Kong-Macao Greater Bay Area, forming a model for regional collaborative development.

4. Conclusion

The passage of the Hong Kong "Stablecoin Regulation Draft" has a far-reaching positive impact on the virtual currency industry in Hong Kong and mainland China. For Hong Kong, the bill consolidates its status as a global digital asset hub and promotes the development of financial innovation, investor protection, and cross-border payments. For mainland China, Hong Kong's regulatory experience provides a reference for the mainland, promoting the internationalization of the Renminbi, the coordinated development of financial technology in the Guangdong-Hong Kong-Macao Greater Bay Area, and indirectly stimulating the application of blockchain technology. In the future, as the Hong Kong stablecoin market matures and its cooperation with the mainland deepens, both sides will occupy a more important position in the global digital finance field, injecting new momentum into regional economic development.