The Hong Kong Stablecoins Ordinance has been in effect for four months, and 36 institutions are competing for licenses!

Since the formal enactment of Hong Kong's Stablecoin Ordinance, four months have quietly passed. During this period, the city's virtual asset sector has undergone a pivotal shift towards regulation. The lively competition among 36 institutions vying for stablecoin issuance licences further underscores market confidence and anticipation for Hong Kong's compliant virtual asset ecosystem.

Reflecting on the Stablecoin Ordinance's genesis reveals both its inevitability and foresight. As the virtual asset market rapidly expands, stablecoins – serving as vital bridges between traditional finance and the virtual asset sphere – have seen continuous growth in scale and diversification in applications. Concurrently, however, the risks stemming from a lack of unified regulation have become increasingly apparent. Previously, the global stablecoin sector faced issues such as insufficient reserves held by issuers, opaque information disclosure, and a lack of cross-border regulatory coordination, severely impacting market stability and investor rights.

Against this backdrop, Hong Kong has proactively introduced the Stablecoin Ordinance. This legislation explicitly defines ‘regulated stablecoins’ as those pegged to a single fiat currency and offered to the Hong Kong public. It establishes detailed requirements concerning issuer qualifications, reserve asset management, and disclosure obligations. The aim is to foster the healthy development of the stablecoin industry through rigorous and transparent regulation, thereby reinforcing Hong Kong's position as an international financial centre.

Since its implementation in April, the most tangible market response has been the enthusiastic participation of 36 institutions. These entities span traditional financial institutions, virtual asset service providers, and technology firms, reflecting both proactive local engagement and active international involvement. Why has Hong Kong's stablecoin licence sparked such intense competition?

The core reason lies in Hong Kong's unique advantages: on the one hand, it possesses a mature financial market system, a comprehensive legal and regulatory framework, and an international business environment, providing stable and compliant operational ground for stablecoin issuers; on the other hand, backed by the vast mainland market while facing global markets, it offers extensive space for the application and promotion of stablecoins. For institutions, securing a Hong Kong stablecoin licence signifies not only a “passport” to enter the compliant virtual asset markets of Hong Kong and beyond, but also the opportunity to leverage Hong Kong's financial strengths to expand business boundaries and achieve cross-sector resource integration.

From an industry development perspective, the implementation of the Stablecoin Ordinance and the surge in licence applications are propelling Hong Kong's virtual asset sector from ‘unregulated growth’ towards ‘regulated maturity’. Prior to the ordinance's enactment, while the sector grew rapidly, it faced issues such as regulatory ambiguity and risk accumulation. Non-compliant practices by some institutions not only harmed investor interests but also tarnished the industry's overall reputation. The Ordinance's implementation has clarified regulatory boundaries and operational standards, compelling institutions to enhance their compliance capabilities, risk management frameworks, and disclosure practices. The licensing process demands strict adherence to requirements including registered capital, reserve asset custody, and anti-money laundering/counter-terrorist financing protocols. This inevitably filters out underqualified, high-risk entities, leaving only robust, compliance-focused institutions. This process of ‘survival of the fittest’ will help optimise the industry ecosystem, enhancing its overall credibility and competitiveness.

Simultaneously, the standardised development of the stablecoin sector will inject fresh vitality into Hong Kong's financial markets. As a novel payment instrument and store of value, stablecoins offer advantages such as low cost, high efficiency, and cross-border convenience. With the introduction of compliant stablecoins, they are poised for widespread adoption across multiple domains including cross-border payments, trade finance, and the digital economy, thereby further enhancing payment efficiency and service standards within Hong Kong's financial markets. Moreover, the regulated development of stablecoins will stimulate growth across related industrial chains, such as reserve asset custody, compliance consultancy, and technical services. This will generate additional employment opportunities and economic growth drivers, supporting Hong Kong's ambition to establish itself as an international virtual asset hub.