What Are Stablecoins? How Will Hong Kong’s Stablecoin Ordinance Reshape the Fintech Landscape?

Recently, stablecoins have become a hot topic in both the cryptocurrency market and traditional finance. With Hong Kong’s Stablecoin Ordinance set to take effect soon, its regulatory framework and global influence have come under the spotlight. This article will delve into what stablecoins are and analyze the key regulatory aspects and strategic significance of Hong Kong’s Stablecoin Ordinance.

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What Are Stablecoins?

Stablecoins are a type of cryptocurrency pegged to reserve assets (such as fiat currency or gold) and maintain price stability through a reserve-backed mechanism. Compared to highly volatile crypto assets like Bitcoin (BTC) and Ethereum (ETH), stablecoins exhibit lower volatility and more stable prices—hence the name.

The value of stablecoins is typically anchored 1:1 to reserve assets. For example, if an issuer holds $10 million in fiat reserves, it can issue an equivalent amount of stablecoins. Common USD-pegged stablecoins include USDT and USDC.

This design combines the transactional efficiency of cryptocurrencies with the stability of traditional assets, making stablecoins a vital tool for trade settlements, hedging, and cross-border payments.

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Hong Kong’s Stablecoin Ordinance

Hong Kong’s Stablecoin Ordinance (FRS, Fiat-Referenced Stablecoin) was passed on May 21, 2025, and will take effect on August 1, 2025. The ordinance establishes a comprehensive regulatory system for the issuance and distribution of fiat-backed stablecoins, with the following key provisions:

1. Licensing System & Advertising Restrictions

All institutions issuing or distributing stablecoins in Hong Kong must obtain a license from the Hong Kong Monetary Authority (HKMA) to ensure compliant operations. Only licensed entities may promote stablecoin products to the public, preventing fraud and misleading marketing.

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2. Transparent Reserve Asset Management

Issuers must maintain sufficient reserves, strictly segregate customer assets, and submit regular third-party audit reports. Reserve assets are limited to highly liquid instruments (e.g., cash, short-term government bonds) to ensure immediate redemption capability.

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3. Compliance & Risk Management

Issuers must adhere to Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) regulations, establish risk contingency plans, and disclose operational details in whitepapers.

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4. Supervision & Enforcement

The HKMA is authorized to conduct on-site inspections, penalize violations, and even revoke licenses. A specialized court will handle regulatory disputes to expedite resolutions.

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The Significance & Impact of the Stablecoin Ordinance

The enactment of Hong Kong’s Stablecoin Ordinance is a major milestone, not only enhancing the regulatory framework for digital assets but also solidifying Hong Kong’s status as a global financial hub and setting a benchmark for stablecoin development worldwide.

• Attracting Global Investment

  The clear regulatory framework draws multinational corporations and investors, strengthening Hong Kong’s competitiveness as Asia’s digital asset hub.

  
  

• Bridging Traditional Finance & DeFi

  Stablecoins serve as a critical link between traditional finance and decentralized finance (DeFi), paving the way for compliant issuance and applications like cross-border payments and asset tokenization.

  
  

• Boosting Cross-Border Trade

  The introduction of HKD-backed stablecoins could reduce exchange costs and processing times, enhancing Hong Kong’s role in international trade settlements.

  
  

• Balancing Innovation & Regulation

  Hong Kong’s "risk-controlled" approach sets a global standard for stablecoin oversight.

  
  

• Advancing RMB Internationalization

  The ordinance creates conditions for the development of RMB-denominated stablecoins, promoting the use of the Chinese yuan in offshore markets and global trade.

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Conclusion

Stablecoins combine liquidity and stability, making them essential for trade settlements, hedging, and cross-border payments. With the passage of Hong Kong’s Stablecoin Ordinance, the city reinforces its leadership in global fintech and deepens its influence in the virtual asset market.