With the increasing activity in global virtual asset trading, stablecoins, as a key bridge connecting traditional finance and the crypto ecosystem, have become the focus of attention for regulatory frameworks in various countries. Hong Kong, a city committed to becoming an international digital financial center, is setting clear compliance boundaries for the stablecoin market with unprecedented determination. On October 29, 2025, the Secretary for Justice of the Hong Kong Special Administrative Region, Paul Lam, reiterated in Beijing at the Financial Street Forum Annual Conference that both locally and overseas issued stablecoins claiming to be pegged to the value of the Hong Kong dollar must apply for a license from the Financial Commissioner. This strong statement not only further improves Hong Kong's digital asset regulatory system but also conveys a firm stance to the global market on maintaining financial stability and protecting investor interests in the Web3 era.
- Secretary for Justice Draws the Red Line: Global Mandatory Licensing for Hong Kong Dollar-Pegged Stablecoins
In his speech at the Financial Street Forum Annual Conference, Secretary Paul Lam clarified Hong Kong's strict stance on stablecoin regulation.
Mandatory Licensing System: He pointed out that in recent years, digital assets "stablecoins" linked to fiat currencies have rapidly emerged. In August of this year, Hong Kong launched the "Stablecoin Ordinance" to regulate activities related to stablecoins and establish a licensing system. After the ordinance is implemented, anyone issuing fiat stablecoins in Hong Kong, or issuing fiat stablecoins claiming to be pegged to the value of the Hong Kong dollar in or outside of Hong Kong, must apply for a license from the Financial Commissioner.
Strict Compliance Requirements: Relevant parties must comply with regulations regarding reserve asset management and redemption, including properly segregating client assets and maintaining a sound stability mechanism. These requirements aim to ensure the value stability of stablecoins and the safety of investor assets.
Maintaining Financial Stability: The "Stablecoin Ordinance" further improves Hong Kong's regulatory framework for digital asset activities to safeguard monetary and financial stability and strengthen Hong Kong's position as an international financial center.
- Hong Kong's Digital Asset Regulatory Framework: A Multi-Pronged Approach to Continuous Improvement
Secretary Paul Lam emphasized that ensuring all financial activities are conducted strictly in accordance with the law and that all violators face legal sanctions is key to maintaining public confidence in the financial system. Hong Kong has always adopted a multi-pronged enforcement mechanism for the financial market and continuously reviews existing mechanisms and adjusts relevant laws based on market developments and emerging risks.
Licensing System for Virtual Asset Trading Platforms: To protect investors and reduce risks to the traditional financial system, Hong Kong implemented a licensing system for virtual asset trading platforms in June 2023. All central virtual asset trading platforms operating in Hong Kong or actively promoting their services to Hong Kong investors must be licensed by the Securities and Futures Commission and comply with relevant regulatory requirements.
Strengthening Investor Protection: The Financial Services and the Treasury Bureau and the Securities and Futures Commission launched a joint consultation at the end of June this year, planning to introduce a regulatory system for virtual asset trading services and custodians, empowering the Securities and Futures Commission to license and supervise these two types of service providers and enforce relevant regulations. The Securities and Futures Commission will also be responsible for formulating compliance standards for these two important service providers.
Limiting Misleading Terminology: Hong Kong also proposed to amend relevant laws to restrict the use of certain terms that may mislead investors, such as terms that might lead investors to mistakenly believe that a certain business or operation is regulated by the Securities and Futures Commission.
Multi-Department Collaborative Law Enforcement: The Hong Kong Securities and Futures Commission focuses on the regulation of the securities and futures sector; the Hong Kong Stock Exchange supervises listed issuers and listed companies through its listing committee. If a case involves other commercial fraud or corruption crimes, the Hong Kong Police Force and the Independent Commission Against Corruption will also intervene in the investigation.
- Digital Hong Kong Dollar: Prioritizing Wholesale Level, Exploring CBDC Applications
While the regulation of stablecoins is tightening, Hong Kong is also steadily advancing in the field of central bank digital currency (CBDC).
"Digital Hong Kong Dollar" Pilot Program: The Hong Kong Monetary Authority released the second phase report of the "Digital Hong Kong Dollar" pilot program, introducing experimental results and experiences. The report shows that the 11 experimental groups in the second phase cover three major themes of innovation use cases: tokenized asset settlement, programmability, and offline payments.
Prioritizing Wholesale Level Development: The Hong Kong Monetary Authority stated that the current demand for the "Digital Hong Kong Dollar" is concentrated outside retail scenarios, so it will prioritize the development of "Digital Hong Kong Dollar" applications at the wholesale level, promoting the use of the "Digital Hong Kong Dollar" for payments between financial institutions.
Supporting Tokenized Ecosystems and Cross-Border Payments: Some financial institutions have already used the "Digital Hong Kong Dollar" in certain use cases to support the development of tokenized ecosystems and cross-border payment scenarios, such as international trade settlement. The Hong Kong Monetary Authority will announce a set of shared tokenization standards to promote the widespread application of digital currency programmability.
- Beijing-Hong Kong Cooperation and Talent Development: Hong Kong's Unique Role
Secretary Paul Lam emphasized that under the "One Country, Two Systems" principle, Hong Kong must better leverage its unique institutional advantages to integrate more effectively into the national development framework.
Financing Platform: Hong Kong can serve as a financing platform for various enterprises based in Beijing when they "go global" or cooperate with foreign parties.
Reference for Financial Rule of Law Construction: Providing a reference for the construction of financial rule of law in Beijing.
Talent Development: Assisting Beijing in cultivating financial legal service talents with accumulated experience and knowledge.
Paul Lam looks forward to discussing with various units involved in financial rule of law construction in Beijing how to formulate and implement specific measures to deepen cooperation and jointly enhance the level of foreign-related rule of law construction.
Conclusion:
The reiteration by Hong Kong's Secretary for Justice, Paul Lam, regarding the global mandatory licensing for Hong Kong dollar-pegged stablecoins once again demonstrates Hong Kong's firm determination in digital asset regulation. This will not only further improve Hong Kong's regulatory framework for digital asset activities and safeguard monetary and financial stability but also strengthen Hong Kong's position as an international financial center. In the Web3 era, Hong Kong is striving to seek a balance between financial innovation and risk control through its unique institutional advantages and continuously improving regulatory system, providing a "Hong Kong solution" for global digital financial governance.
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Original Article: “Hong Kong Draws Key Red Lines for Stablecoins, What Did the Secretary for Justice Actually Say?”
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