Hong Kong moves on stablecoin licenses and crypto rules despite China stance

Hong Kong is accelerating efforts to build a regulated digital-asset ecosystem, advancing stablecoin licensing and expanding crypto market infrastructure even as mainland China maintains a strict ban on cryptocurrency activity.

Authorities say the initiative is designed as a supervised framework for financial innovation rather than a reversal of Beijing’s policy.

The developments were discussed across legislative meetings, where regulators outlined plans for new products, trading mechanisms, and institutional participation.

Stablecoin licenses expected soon

The Hong Kong Monetary Authority (HKMA) is reviewing applications from prospective stablecoin issuers and could make decisions in the coming weeks.

“We hope that by March we will be able to make a decision,” Eddie Yue, Chief Executive of the HKMA, told a Legislative Council meeting, adding that the authority was reviewing an initial tranche of 36 stablecoin issuer applications.

Hong Kong passed its Stablecoins Ordinance in May, requiring licenses for entities that issue stablecoins in the city or peg them to the Hong Kong dollar.

The law took effect in August, and the regulator began accepting applications shortly afterward.

Stablecoins — digital tokens designed to hold steady value by being linked to assets such as fiat currency or gold — are increasingly central to blockchain activity.

Jordan Wain, policy advisory lead from Chainalysis, said in a CNBC report that stablecoins now account for more than half of the value of transactions recorded directly on blockchains, making them “central to the crypto ecosystem.”

Regulators see potential use cases in cross-border payments and tokenized bank deposits.

Prospective issuers argue Hong Kong dollar-backed stablecoins could enable faster refunds, quicker international payments, and more transparent foreign-exchange pricing.

China’s concerns and a cautious rollout

Despite Hong Kong’s push, Beijing remains skeptical about cryptocurrency activity.

Chinese regulators previously advised against the plan, and the mainland continues to prohibit crypto trading and issuance.

China tightened controls beginning in 2013 and imposed a comprehensive ban on cryptocurrency transactions in 2021, citing volatility and illicit finance risks.

Authorities are also concerned about monetary sovereignty.

“Stablecoins challenge [Beijing’s] state control over money, payments and capital flows, and therefore sit uneasily with China’s state-centered model of monetary governance, which prioritizes oversight and domestic financial stability,” Monique Taylor of the University of Helsinki told CNBC.

Officials are also wary of US dollar-backed tokens strengthening the dollar’s influence in digital finance.

A joint statement by Chinese regulators recently reaffirmed the ban on crypto activities, including unauthorized yuan-linked stablecoins.

Analysts view Hong Kong’s program as a limited trial rather than a policy shift.

Taylor described it as a “limited and cautious rollout,” while noting there is “little evidence that China is moving to reverse its ban on cryptocurrencies.”

Expanding crypto markets and Web3 ambitions

Alongside stablecoins, Hong Kong regulators are developing broader market infrastructure.

The Securities and Futures Commission plans to introduce a framework allowing trading platforms to offer perpetual futures contracts to institutional investors.

“We will be publicizing a high-level framework for platforms to be offering perpetual contracts,” SFC CEO Julia Leung said at the CoinDesk's Consensus Hong Kong conference.

The SFC also intends to allow brokers to provide financing backed by digital assets.

“We will allow brokers to provide financing to clients with strong … credit profiles, and the collateral will be backed by both securities as well as virtual assets,” she said, adding that eligible collateral will initially include bitcoin and ether.

City leaders say the effort is part of a larger financial strategy. “The HKSAR Government is committed to establishing Hong Kong as a global hub for innovation in digital assets,” Chief Executive John KC Lee said. “That’s why over the past few years, Hong Kong has been actively building the regulatory framework to promote the steady and sustainable development of our Web3 ecosystem.”

Officials believe the city’s regulatory clarity and global financial links could attract international firms while remaining compatible with China’s cautious stance — positioning Hong Kong as a controlled gateway between traditional finance and digital assets.