Hong Kong Expands Crypto Oversight with Stablecoin Law

Hong Kong has kicked off a comprehensive stablecoin licensing regime along with new crypto tax regulations, positioning itself as a global crypto regulatory leader.

Key Takeaways

• Hong Kong launched a stablecoin licensing regime, with 36 firms applying to operate under new rules.
• A new crypto tax framework will begin rolling out in 2025, with full implementation by 2028.
• The licensing process includes strict standards on reserves, audits, and risk management for stablecoin issuers.
• Authorities aim to balance innovation with consumer protection and international regulatory compliance.

What Happened?

Hong Kong has officially activated its stablecoin licensing rules, accepting applications from dozens of firms and laying out strict requirements for stablecoin issuers. Alongside this, the government unveiled plans for a comprehensive cryptocurrency tax framework, set to be fully operational by 2028. These developments place Hong Kong at the forefront of global crypto regulation.

Stablecoin Licensing Regime Begins

The Hong Kong Monetary Authority (HKMA) began accepting applications under its stablecoin licensing framework in late 2025. A total of 36 companies have applied, highlighting strong demand to operate in a regulated digital asset environment. The transition period ends on January 31, 2026, and licenses are expected to be granted in early 2026.

The rules mandate:

• Full reserve backing in high-quality liquid assets.
• Redemption and risk management systems.
• Independent audits and transparency reporting.
• Specific provisions for algorithmic stablecoins with additional safeguards.

The licensing system was built upon HKMA’s regulatory sandbox, which launched in mid-2024 to allow firms to test stablecoin models under supervision.

Hong Kong’s Strategy: Regulation Meets Innovation

Financial Secretary Paul Chan, speaking at the World Economic Forum 2026, emphasized that Hong Kong does not view stablecoins as a disruptor to traditional finance but as a tool to improve cross-border payments and liquidity management.

Christopher Hui, Secretary for Financial Services and the Treasury, reiterated the city’s intent to support innovation while ensuring financial stability. He said:

The licensing regime forms part of Hong Kong’s broader plan to become a regional crypto hub, aligning with major initiatives like Project Ensemble, a trial launched in November 2025 to test tokenized deposits and digital asset use cases in collaboration with major financial institutions.

New Crypto Tax Framework Unveiled

In parallel, Hong Kong’s government has proposed a crypto tax reporting regime, with full implementation set for 2028.

Key features include:

• Integration into the Common Reporting Standard (CRS).
• Reporting obligations for financial institutions and crypto service providers.
• Requirements to collect and share wallet addresses, transaction data, and counterparties.
• Amendments to define virtual assets under Hong Kong’s tax code.

This framework is designed for international cooperation, with mechanisms to automatically exchange tax data between jurisdictions, targeting transparency and compliance rather than imposing new tax burdens.

Regulation of Crypto Custody Services

Alongside stablecoin licensing, Hong Kong will also regulate crypto custodians through the Securities and Futures Commission (SFC). The upcoming legislation will:

• Require cold storage solutions and security audits.
• Enforce segregation of client and company funds.
• Mandate insurance coverage for asset protection.

These rules build on existing crypto exchange regulations and aim to encourage institutional participation by boosting trust in digital asset custody.

Industry Response and Global Implications

Industry players have generally welcomed the clarity, though some warn of compliance challenges. Larger banks and asset managers are preparing to launch crypto custody services and tokenized products, while smaller firms may face rising compliance costs.

Hong Kong’s model echoes aspects of the EU’s MiCA and Singapore’s Payment Services Act, but adapts them to its unique market. By classifying stablecoins based on risk profiles, Hong Kong hopes to set new technical and legal benchmarks for Asia and beyond.

CoinLaw’s Takeaway

In my experience watching the crypto landscape evolve, regulatory clarity is what the industry needs most, and Hong Kong just delivered a bold playbook. Instead of just experimenting, they’re putting serious infrastructure behind stablecoins, custody, and even taxation. That builds trust, not just among users, but also with institutions that were waiting on the sidelines. I found the phased tax rollout especially smart, giving firms time to adjust. If done right, this could make Hong Kong a blueprint for responsible crypto adoption worldwide.

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