In fairness to the Hong Kong Monetary Authority (HKMA), it is rare that the digital assets industry is satisfied with regulations. Crypto firms want regulations that provide them with the legal and safety benefits enjoyed by the rest of the financial industry without slowing down their preferred breakneck speed of development or putting them at a disadvantage vis a vis incumbents.
When it comes to stablecoins, it has become clear that the HKMA favors a cautious, gradualist approach that the digital assets industry sees as restrictive. The comprehensive licensing regime launched in August 2025 requires issuers of fiat-referenced stablecoins (FRS) to be licensed while maintaining strict reserve management, capital adequacy, and anti-money laundering (AML) standards. Senior management, including the CEO and “stablecoin managers,” are required to reside in Hong Kong, which increases operational costs and complicates the model for global firms. Stringent Know-Your-Customer (KYC) rules apply to transactions as low as HK$8,000 (about US$1,000), which experts say may limit near-term profitability.
In an April press release published after it granted the first two stablecoin issuance licenses, the HKMA said that its regulatory regime “underscores the HKMA’s commitment to establishing a robust, risk-based and agile regulatory framework that adheres to the principle of ‘same activity, same risks, same regulation’ and aligns with international regulatory standards. This ensures financial stability, combats money laundering, and protects investors.”
The HKMA received applications from a total of 36 entities as of the deadline of September 30, 2025. Of those 36 applicants, it selected what almost certainly were the two safest possible choices: Anchorpoint Financial (a joint venture of Standard Chartered Bank, HKT and Animoca Brands) and the Hong Kong and Shanghai Banking Corporation. (HSBC). Standard Chartered and HSBC are the two largest banks in Hong Kong and among the three banks that issue Hong Kong banknotes (Bank of China is the third).
Given the HKMA’s priorities for stablecoin issuance, it is not hard to see why it chose a Standard Chartered-backed business and HSBC for the first two licenses. Industry, however, is disappointed. There was an expectation that at least three licenses would be issued and that the recipients would hail from a wider variety of backgrounds.
A recent post on Binance Square noted that the list of failed applicants include included not only Yuancoin Technology, founded by former HKMA Chief Executive Norman Chan, but also JD.com’s CoinChain, a former sandbox participant, and OSL, Hong Kong’s largest licensed virtual asset exchange. “Those institutions that harbored strategic ambitions and brought in hot money to try and expand their territory in the digital currency wave ultimately suffered a complete defeat,” the post said, adding that as far as regulators are concerned, “stablecoins have never been a business, but rather an infrastructure. And infrastructure is destined to be entrusted only to those ‘their own people’ who know them best.”
A key problem here is that while Hong Kong has ambitions to be a digital asset hub, it is already a mature financial center and advanced economy. On the one hand, the city has high-speed, low-cost traditional payment systems. Unlike countries with high inflation or poor financial infrastructure, Hong Kong’s traditional banks already handle cross-border payments efficiently. On the other, since 1983, the HKD has been pegged to the USD, providing a stable, trusted fiat currency for international trade. This reduces the need for a USD-denominated stablecoin (like USDC/USDT) for basic hedging.
That’s not to say stablecoins do not have a bright future in Hong Kong. The city has been more proactive about developing regulations for the fiat-backed virtual currencies than most other jurisdictions. But the pace of development is going to be slower than the crypto industry would like, with entrenched incumbents likely to benefit more than plucky upstarts.