Hong Kong Advances Stablecoin Plans Despite China Ban

Hong Kong is moving forward with issuing its first stablecoin licenses in March, signaling a bold step in regulated digital finance even as Beijing maintains a strict ban on crypto.

Key Takeaways

• The HKMA is reviewing 36 applications for stablecoin licenses and expects to announce approvals in March.
• China opposes crypto activity, but Hong Kong is using its autonomy to explore regulated stablecoin use cases.
• Initial licenses will go to firms with strong compliance, sustainable models, and innovative real-world use cases.
• Officials view this rollout as cautious and limited, aimed at supporting financial innovation without defying Beijing.

What Happened?

Hong Kong’s financial regulators confirmed that the city is preparing to issue the first stablecoin licenses in March under a new digital asset framework. This move proceeds despite China’s opposition to crypto-related activity, including stablecoins. Officials emphasized that the rollout is intended to support regulated financial innovation, not to challenge Beijing’s crypto policies.

Stablecoin Regulation Moves Ahead

The Hong Kong Monetary Authority (HKMA) is currently reviewing 36 applications under its new licensing regime, introduced after the Stablecoins Ordinance passed in May and took effect in August. The law requires licensing for any entity issuing stablecoins in Hong Kong or pegging them to the Hong Kong Dollar.

HKMA Chief Executive Eddie Yue told lawmakers that the authority aims to make licensing decisions by March. The licenses are expected to support specific use cases like cross-border payments and tokenized deposits, particularly for international banks.

Companies such as Payment Cards Group say that Hong Kong dollar-backed stablecoins could offer faster refunds, quicker global transactions, and more transparent exchange rates.

Jordan Wain of Chainalysis noted that stablecoins now represent over half the value of all blockchain-recorded transactions, making them central to the digital asset ecosystem. This widespread utility is a key reason regulators and financial institutions globally including in Japan and Europe are racing to create safe, regulated stablecoin environments.

China’s Hardline Crypto Stance Remains

Mainland China, however, remains deeply skeptical of cryptocurrency. Since banning crypto transactions in 2021, citing fraud and capital flight concerns, Beijing has taken a firm stance against any form of private digital currency circulation.

A Financial Times report revealed that in October, Chinese regulators advised against Hong Kong’s stablecoin initiative, which temporarily stalled its progress. More recently, eight Chinese regulatory bodies jointly reaffirmed the national ban, explicitly rejecting yuan-backed stablecoin issuance.

Monique Taylor, an academic from the University of Helsinki, explained that stablecoins challenge Beijing’s tight control over capital flows, money, and payments. She said China is particularly wary of dollar-backed tokens that could strengthen the global role of the U.S. dollar in digital finance.

Hong Kong’s Strategy: Controlled Innovation

Despite China’s concerns, Paul Chan Mo-po, Hong Kong’s Financial Secretary, confirmed that the city would proceed with issuing a small number of licenses to firms that demonstrate credible use cases, strong compliance, and sustainable models.

Speaking at the CoinDesk’s Consensus Hong Kong conference, Chan emphasized that this is a targeted rollout, not a wide-open crypto launch. He also noted that Hong Kong is finalizing a separate regulatory regime for custodian service providers, with legislation expected by summer.

This cautious regulatory approach extends to broader crypto infrastructure. Julia Leung, CEO of the Securities and Futures Commission (SFC), said the SFC plans to allow platforms to offer perpetual futures contracts and let brokers provide collateral-backed financing using virtual assets like bitcoin and ether.

Chan highlighted three major trends shaping the future:

• The rise of tokenized real-world assets like government bonds.
• Increasing links between DeFi and traditional finance.
• The emergence of the machine economy, where AI agents could manage and exchange digital assets autonomously.

Officials believe these innovations position Hong Kong to become a global hub for digital finance, balancing financial openness with regulatory safeguards.

CoinLaw’s Takeaway

In my experience, this move shows Hong Kong is doing what it does best, acting as a financial bridge between East and West. While China tightens the leash on digital currency, Hong Kong is showing that with the right controls, stablecoins can work inside a regulated system. I found it especially interesting that AI, tokenization, and DeFi are all part of the city’s broader vision. This isn’t about chasing crypto hype. It’s about future-proofing financial infrastructure. As long as they manage the risks, this could become a blueprint for digital asset policy worldwide.

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