Financial encyclopedia

On May 21, 2025, Hong Kong passed the "Stablecoin Ordinance Bill", officially establishing a regulatory framework for "stablecoins", the most promising virtual asset category. Hong Kong has the opportunity to become the first free financial center in Asia where legal issuance and use of digital currencies are permitted. 

What is a stablecoin? 

Stablecoins are a type of cryptocurrency pegged to fiat currencies such as the Hong Kong dollar or the US dollar, with stable values. Common examples include USDT and USDC. Their uses include digital payments, depositing funds for crypto trading, asset transfer, etc., and they are particularly suitable for cross-border capital flows. 

After the emergence of Hong Kong's stablecoin, the Hong Kong dollar will not only exist in the form of cash and bank deposits, but may also appear in your mobile phone in the form of a token. 

The bill sets forth multiple requirements to ensure market safety and confidence: 

The issuer needs to apply for a license. 

For every 1 coin issued, there must be 1 yuan of reserve support. 

There must be an immediate redemption mechanism in place. 

Overseas platforms targeting Hong Kong people are also subject to regulation. 

Customer assets must be independently custodied to prevent misappropriation. 

Why does Hong Kong need to take action? 

Stablecoins have developed rapidly, but they also carry many hidden risks. Hong Kong has previously established a licensing system for virtual asset platforms, and this time it has further filled the gap of "stablecoins". The aim is to create a complete and secure crypto financial environment and seize the position of a global Web3 hub. 

What opportunities do stablecoins bring? 

Financial innovation accelerates: Virtual banks, tokenized assets, and Web3 payment systems gain new momentum. 

The Hong Kong dollar is expected to internationalize: penetrating cross-border settlements and asset markets through stablecoins. 

New funding channel: Connecting the flow of funds between the US dollar and the RMB, with more flexible roles. 

At the same time, risks exist: 

Stablecoins are still in their infancy, and their application scenarios are not yet mature. 

The issuing institutions must meet high standards of capital and risk management, and the threshold is not low. 

The general public still has doubts about the trustworthiness of cryptocurrencies. 

The stablecoin bill represents Hong Kong's attempt to secure a place in the new global financial order. Whether it is an opportunity to pioneer or a risky experiment depends on the enforcement of regulation, the level of corporate participation, and the market's acceptance. 

If successful, Hong Kong will not only remain the financial center of Asia but also have the opportunity to become a key node for the issuance and circulation of global stablecoins. This legislation may be a low-key but significant reboot of the financial system.