Hong Kong’s Stablecoin Licensing Initiative
In a move aimed at enhancing its reputation as a leading fintech center, Hong Kong is preparing to grant licenses to stablecoin providers within the first three months of this year, as disclosed by Financial Secretary Paul Chan during his remarks at the World Economic Forum in Davos on Tuesday. This forthcoming issuance marks the initial wave of licenses under the territory’s newly established stablecoin regulatory framework, which went into effect on August 1, 2023.
Licensing Requirements
To legally operate or promote stablecoins for retail consumers, businesses must secure authorization from the Hong Kong Monetary Authority. This licensing process mandates adherence to stringent standards regarding reserve assets, ensuring redemptions are made at their par value, keeping clients’ funds separate, and complying with anti-money laundering regulations.
So far, the identities of companies slated to receive the inaugural licenses have not been revealed. Data from local media outlet The Standard indicates that by September 2025, 36 companies had submitted their applications. Notably, one application comes from a collaboration involving Standard Chartered, Animoca Brands, and HKT. Other prominent entities such as Ant Group’s Alipay and JD.com previously engaged in a stablecoin test phase, only to allegedly be prompted by mainland Chinese authorities to pause their licensing pursuits in Hong Kong.
Hong Kong’s Approach to Digital Assets
During his stay at the forum, Chan emphasized Hong Kong’s “proactive yet prudent” approach towards digital assets, highlighting their potential to promote transparency, increase efficiency, ensure inclusiveness, and improve risk management within financial services.
He added that these innovations also contribute to more effective capital allocation in the real economy.
Global Context and Market Trends
Globally, stablecoins have garnered significant traction, with their total market capitalization reaching $309 billion, as reported by DefiLlama. Major financial institutions, including JP Morgan, Bank of America, PayPal, and Visa, have all expressed interest in this sector. Within the crypto community, Ethereum co-founder Vitalik Buterin has advocated for stronger decentralized stablecoins that are less reliant on the US dollar. Similarly, Plasma’s CEO Paul Faecks urged the need for open frameworks conducive to global payment solutions that would benefit everyday consumers and merchants.
While interest in stablecoins continues to surge, the short-term outlook remains cautious, with current predictions on platforms like Myriad estimating only a 3% chance that stablecoins’ market cap will exceed $360 billion in the near term.
Hong Kong’s Web3 Ambitions and Challenges
Hong Kong’s ambition to emerge as a prominent Web3 destination has seen mixed outcomes, as the government strives to merge cryptocurrency with traditional financial systems. It has initialized licensing systems not only for stablecoin providers but also for cryptocurrency exchanges, and anticipates further regulatory developments for over-the-counter crypto trading. Since the onset of 2023, Hong Kong has issued licenses to 11 trading platforms and promoted tokenization by issuing $2.1 billion in tokenized green bonds. Additionally, it was among the first to offer spot exchange-traded funds (ETFs) for Bitcoin and Ethereum, launching these products at the beginning of 2024.
However, the city has faced challenges and controversies linked to financial misconduct in the crypto sphere, most egregiously highlighted by the collapse of the JPEX exchange in 2024, leading to losses of approximately $205 million for customers and regarded as the largest fraud case in Hong Kong’s history. Subsequently, authorities have charged 16 individuals related to the exchange, including influencers, and judicial proceedings are set to commence in March.
