This article is reprinted with permission from the Xiao Za legal team, author: Xiao Za lawyer, copyright belongs to the original author.
As we all know, Hong Kong, as one of the world's financial centers, has always been at the forefront of the cryptocurrency asset field. Small shops for buying and exchanging USDT are spread all over Hong Kong, and the threshold for using cryptocurrency assets in Hong Kong is unprecedentedly low. Of course, the development of cryptocurrency assets in Hong Kong is not entirely chaotic; important legislation is gradually being introduced.
This year, Hong Kong's most influential "Stablecoin Ordinance" has been published and will take effect on August 1, 2025. This was originally a great opportunity to further regulate the cryptocurrency asset industry and financial markets. However, the Xiao Za team noticed that as the effective date approaches, a very strange flyer incident has occurred in the Hong Kong cryptocurrency market, causing widespread panic.
Today, the Xiao Za team will analyze in detail whether USDT can still be bought and sold in Hong Kong after the "Stablecoin Ordinance" is officially implemented, starting from this incident and the response from the Hong Kong Monetary Authority.
As the saying goes, people scare people, and it can be deadly. In August, various USDT shops, cryptocurrency traders, and OTC practitioners in Hong Kong experienced a collective scare, and even a certain USDT trader left Hong Kong immediately upon receiving the news…
Here's what happened: In early August 2025, USDT shops in Hong Kong suddenly received a flyer delivered by an unknown source overnight. The gist was: the Hong Kong "Stablecoin Ordinance" will take effect on August 1, 2025, and anyone who trades specified stablecoins (including USDT) without the relevant license; or engages in regulated stablecoin activities will be considered illegal, with violators facing fines of up to HKD 5,000,000 and imprisonment for 7 years.
Is this news true or false? In my opinion: it's half true and half false, as the main information conveyed seems to exploit the ambiguities of the legislation to promote misleading information.
However, it must be noted that the "Stablecoin Ordinance" may not be good news for many OTC traders in Hong Kong.
To avoid being misled, partners must be aware of some basic concepts in the "Stablecoin Ordinance" in Hong Kong.
(1) What is a "specified stablecoin"?
The concept of "specified stablecoin" is very important; it is one of the foundations of the entire legislation. Sections 3 and 4 of Part 1 of the "Stablecoin Ordinance" clearly define two basic concepts: one is "stablecoin"; the other is "specified stablecoin."
The concept of "stablecoin" defined in Section 3 is easy to understand; it aligns with the traditional understanding of being pegged to a stable, highly liquid asset, used for (1) payment for goods or services; (2) debt settlement; (3) investment, and other economically valuable virtual properties. This provision represents a broad legal definition and description of "stablecoin."
The concept of "specified stablecoin" defined in Section 4 is a bit more complex. Partners can simply understand it as a legally "narrow definition of stablecoin" created by the Hong Kong "Stablecoin Ordinance" to regulate related businesses. The specific text is as follows:
Once partners understand what "regulated stablecoin activities" are, they will know why the Xiao Za team says there is a serious concept-switching behavior by the flyer distributor in the August flyer incident.
(2) What are "regulated stablecoin activities"?
Once partners understand what "regulated stablecoin activities" are, they will know why the Xiao Za team says there is a serious concept-switching behavior by the flyer distributor in the August flyer incident.
According to Sections 5 (1)-(2) of Part 1 of the "Stablecoin Ordinance," regulated stablecoin activities are:
In summary, the "regulated stablecoin activities" clearly defined in the "Stablecoin Ordinance" are actually unrelated to buying and exchanging USDT; they regulate: (1) the issuance of specified stablecoins in Hong Kong;
(2) the issuance of stablecoins outside Hong Kong, where the specified stablecoin is fully or partially pegged to the Hong Kong dollar;
(3) the promotion of stablecoin activities to the public in Hong Kong.
The above "regulated stablecoin activities" strictly regulate the issuance of stablecoins, not the OTC exchange of stablecoins.
To answer the question: there is significant controversy and ambiguity; the "offer" in the "Stablecoin Ordinance" leans more towards "distribution" or "underwriting" behavior.
"Offer" is actually a professional legal term. Article 471 of the Civil Code states: "Parties to a contract may adopt an offer, acceptance, or other means." Therefore, it is generally understood that an offer is "a party's expression of intent to propose contract terms to the other party with the aim of concluding a contract, hoping the other party will accept." In the context of Hong Kong law, an offer is also one of the key elements in the formation of a contract.
Section 6 of Part 1 of the "Stablecoin Ordinance" clearly states: "Offer" refers to specified stablecoins:
According to the provisions of the "Stablecoin Ordinance," if the OTC behavior of traders constitutes "offer" behavior, then such behavior is also within the regulatory scope of the "Stablecoin Ordinance." According to Section 9 of Part 2, it must be a "permitted offeror" to engage in the "offer" of "specified stablecoins."
Currently, there are only five types of "permitted offerors":
(1) Licensed stablecoin holders;
(2) Corporations licensed to provide virtual asset services under Section 53ZRK of the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Chapter 615) (as defined in Section 53ZR of the Anti-Money Laundering Ordinance);
(3) Individuals licensed under Section 8F of the Payment Systems and Stored Value Facilities Ordinance (Chapter 584);
(4) Licensed corporations under Section 116 of the Securities and Futures Ordinance (Chapter 571) for regulated activities of Class 1 (as defined in Schedule 1 of the Securities Ordinance);
(5) Recognized institutions.
In light of the legislative purpose of the "Stablecoin Ordinance," the Xiao Za team believes that the "offer" referred to in the legislation is ambiguous. If the "offer" is understood according to general legal concepts, then transfer behaviors between individuals could also fall under regulatory scope, which would be overly broad and could unduly increase the review obligations and regulatory difficulties for licensed platforms.
Therefore, the Xiao Za team believes that the "offer" in the "Stablecoin Ordinance" leans more towards a "distribution" or "underwriting" behavior.
This can be partially seen from the provisions of Section 3.4.2 of the December 2024 draft of the "Stablecoin Ordinance": "…where, if a third-party entity offers specified stablecoins in Hong Kong, the licensee must ensure that the third-party entity is a permitted offeror… In addition, the licensee must ensure that the third-party arrangements comply with the relevant laws and regulations of the relevant jurisdiction. Specifically, such arrangements should not involve the distribution of specified stablecoins issued by the licensee in jurisdictions where trading specified stablecoins is prohibited."
However, the Xiao Za team must also point out that the "offer" in the "Stablecoin Ordinance" is a general concept, and the legislation itself does not restrict this concept. Therefore, theoretically, traders who do not meet the "permitted offeror" status but still engage in OTC activities (operational behaviors) are within the criminal liability range in Hong Kong, specifically:
(a) Upon conviction through summary proceedings—fines of up to $500,000 and imprisonment for 2 years; if it is a continuing offense, an additional fine of $10,000 for each day the offense continues; or
(b) Upon conviction through public prosecution—fines of up to $5,000,000 and imprisonment for 7 years; if it is a continuing offense, an additional fine of $100,000 for each day the offense continues.
Partners must be extremely cautious.
In summary, if strictly following the definition of "permitted offeror" in the legislation, the currently clear entities that can engage in this business are: (1) VASP license holders; (2) Hong Kong payment license holders; (3) Class 1 license holders.
Currently, the Xiao Za team has not heard of any trader being penalized for providing USDT, USDC, or other stablecoin exchange services. However, to be honest, this cannot be taken as a guarantee that there will be no future crackdowns on OTC behaviors of traders, as regulatory authorities can indeed impose penalties according to the law. In other words, Hong Kong is no longer a paradise for the free exchange of USDT; to avoid being bitten by the "teeth" of criminal law, the Xiao Za team advises partners to plan ahead: get licensed or leave.
Related: China considers launching stablecoins, raising doubts about the dominance of the US dollar and market trust.
Original text: “After the implementation of the Stablecoin Ordinance, can Hong Kong still freely trade USDT?”
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