Tag: hong kong

  • Why the crypto industry is unhappy about Hong Kong’s stablecoin issuance licenses

    Why the crypto industry is unhappy about Hong Kong’s stablecoin issuance licenses

    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. 

  • Why the UAE is a better crypto hub than Hong Kong

    Why the UAE is a better crypto hub than Hong Kong

    We still remember clearly when Hong Kong abruptly decided it wanted to be a cryptocurrency hub. It was late 2022, and the city, reeling from Covid-19 restrictions, needed to get its mojo back as quickly as possible. The timing was almost comical, coinciding neatly with FTX’s dramatic implosion.

     Almost 3 ½ years later, Hong Kong’s crypto industry has made important strides, mostly in the regulatory space. These include launching a mandatory licensing regime for exchanges (VATP) via the Securities and Futures Commission, approving Bitcoin and Ether ETFs, establishing stablecoin regulations, and allowing regulated retail trading. Overall, these moves have fostered a secure environment for institutional and retail capital.

    While Hong Kong is often compared to Singapore because of geographic proximity and some historic rivalry, it is the United Arab Emirates (UAE) that has emerged as a superior digital asset hub. On the one hand, licensing in the UAE can be faster and more tailored to startups than in Hong Kong, and its 0% tax on crypto trading and mining is attractive. Additionally, the UAE provides direct access to significant Middle Eastern capital, including sovereign wealth funds and family offices.

     Digital assets research firm Chainalysis notes that in the 2024 to 2025 reporting window, the UAE economy received upward of $56 billion in crypto value, growing at 33% annually. While this growth rate is slower than the 86.4% growth rate in the previous period-over-period cycle, it still demonstrates steady continuity in the country’s crypto economy. “The robust expansion of merchant services across smaller transaction sizes indicates that crypto is transitioning from a primarily speculative or investment vehicle to a practical payment solution with real-world utility for UAE consumers and businesses,” Chainalysis said.

    Perhaps most important of all, the UAE seems sure of its crypto ambitions in a way Hong Kong does not. This is not only reflected in the favorable regulatory regime and the broader pro-crypto stance of Abu Dhabi and Dubai; it can also be seen in the high local crypto adoption rate. In fact, at 30%, it is well above Hong Kong’s 3% and the global average of 7%. By the estimates of stablecoin solutions provider Triple-A, the UAE’s crypto adoption rate is the world’s highest.

    In contrast, Hong Kong continues to grapple with mainland China’s tight restrictions on digital assets. Following a Nov. 28 meeting, the People’s Bank of China reiterated that digital assets do not share the legal status of fiat currency and are not permitted as a means of payment in commercial transactions. The PBOC emphasized that under Chinese law, crypto-linked business activity constitutes illegal financial activity.

    Of particular note was the PBOC’s denunciation of stablecoins, which are seeing rapid adoption globally and are on the cusp of mainstream acceptance in many countries and regions—including Hong Kong. “Stablecoins, a form of virtual currency, currently fail to effectively meet requirements for customer identification and anti-money laundering, posing a risk of being used for money laundering, fundraising fraud, and illegal cross-border fund transfers,” the PBOC said in a statement.

    China’s leadership has never been comfortable with decentralized virtual currencies and has instead sought to develop central bank-controlled digital money, the e-CNY. But compared to dollar-backed stablecoins, the digital yuan has much narrower appeal.

    Beijing’s antipathy towards cryptocurrency on the mainland inevitably influences investor perceptions of Hong Kong’s attractiveness as a digital asset hub. While those in the know understand that Hong Kong has plenty of room to experiment with crypto because of the One Country, Two Systems governance model, concerns remain about how the mainland’s restrictions could affect broader crypto market growth.This tension between Hong Kong’s crypto ambitions and mainland China’s restrictions on digital assets is likely to persist, which in the long run could put it at a significant disadvantage compared to the UAE.