#HongKongIssueStablecoinLicenses

The Monetary Authority of Hong Kong (HKMA) is indeed entering the final phase of its licensing process, with the first official stablecoin issuer licenses expected to be issued in March 2026.

This step follows the implementation of the Stablecoin Regulations, which came into effect on August 1, 2025. Here's a summary of what this framework entails and why the distribution is being conducted so selectively:

Why "Limited Number"?

HKMA Chairman Eddie Yue emphasized the importance of a cautious approach to safeguard financial stability. The regulator has received approximately 36 applications by the end of 2025, but only a "very small fraction" will be accepted in the initial phase. This ensures:

Supervisory Comfort: The HKMA can closely monitor the initial wave of issuers to iron out any operational kinks.

Market Trust: By only approving the most robust applicants, Hong Kong aims to avoid the collapses seen in unregulated crypto markets.

Key Requirements for Issuers

To secure a license in March, applicants must meet some of the strictest standards globally:

Full Reserve Backing: Stablecoins must be backed 1:1 by high-quality, highly liquid assets (like cash or short-term government bonds).

Segregation of Assets: Reserve assets must be held in a trust and kept strictly separate from the issuer's operating funds.

Redemption Rights: Users must have the right to redeem their stablecoins at par value, typically within one business day.

Local Presence: Issuers must be incorporated in Hong Kong and have their key management personnel based locally.

Capital Requirements: A minimum paid-up share capital of HK$25 million is required.

The licensing rollout in March 2026 is designed to be a "quality over quantity" event, and it carries significant implications for anyone trading or using crypto in Hong Kong.

1. Impact on Retail Trading

The new framework effectively creates a "walled garden" for stablecoins in Hong Kong.

Restricted Menu for Retail: Under the Stablecoins Ordinance, only stablecoins issued by licensed entities can be marketed or sold to retail investors. This means that if a stablecoin doesn't have an HKMA license by March, local exchanges may be legally forced to restrict retail access to it.

The USDT/USDC Dilemma: Global giants like Tether (USDT) and Circle (USDC) have historically dominated the market. If they do not secure a local license (or partner with a local licensee), their availability on Hong Kong-regulated platforms for retail users could be severely curtailed.

Zero Interest: One notable rule is that licensed issuers are prohibited from paying interest to holders. This keeps stablecoins purely as "payment tools" rather than "savings products," preventing them from directly competing with bank deposits in a way that could destabilize the traditional banking system.

Enhanced Safety: For the average trader, the "licensed" label provides a guarantee that the coin is backed 1:1 by high-quality assets (like cash or short-term bonds) and that they have a legal right to redeem their tokens at par within one business day.

2. The Potential First Issuers ("March Group")

The HKMA is initially expected to approve only a small number of issuers.

Note: While gold-backed stablecoins are popular in some regions, the HKMA has clarified that it currently has no plans to license stablecoins backed by physical gold under this specific fiat-referenced framework.