The Stablecoins Ordinance (Cap. 656) took effect on 1 August 2025 — among the world's first dedicated stablecoin statutes. It reaches extraterritorially, criminalises unlicensed issuance, and demands 100% reserve. Admired and criticised in equal measure: is it principled leadership or overreach that pushes activity elsewhere?
1. The three-pronged perimeter
The Ordinance regulates three activities, each deliberately drafted wide:
| Prong | Scope | Why it's aggressive |
|---|---|---|
| Issuance in HK | Any stablecoin issued in Hong Kong needs a licence | Baseline — comparable to EU MiCA |
| Offshore issuance of HKD stablecoins | Extraterritorial: an HKD-referenced coin issued anywhere falls in scope | Rare — asserts jurisdiction over foreign issuers by currency peg alone |
| Active marketing to HK public | Soliciting the HK public in stablecoin business requires a licence even if conducted offshore | "Marketing into HK" test catches offshore operators without a HK entity |
2. Why it's controversial
- Extraterritoriality vs enforceability: claiming jurisdiction over any HKD-pegged stablecoin issued anywhere is doctrinally bold — but HKMA's practical reach stops at entities with HK touchpoints or banking relationships.
- The OTC gap: physical exchange shops selling USDT for cash remained outside the regime after JPEX — the most visible retail risk stayed in the grey zone.
- Hype overhang: dozens of companies announced "intent to apply", inflating valuations on press releases; few had substance behind them — regulators issued repeated cautions.
- Innovation cost: critics argue 100% reserve + local requirements price out the very innovation the regime wanted to host.
RegSir's take
The Ordinance is well-drafted on paper — the extraterritorial prong is the right doctrinal answer to "issuance can be anywhere". But a perimeter is only as strong as its enforcement radius: offshore issuers without HK touchpoints sit beyond practical reach, which means the provision mostly disciplines honest applicants while truly offshore actors are undeterred. The more urgent gap was always OTC distribution — the JPEX-shaped hole — and that awaits the DA-dealer law. Strictness on paper + gaps at the edges is the pattern Hong Kong keeps repeating.
3. Compliance takeaways
- Issuers: if any HKD peg or HK marketing is planned, assume Cap. 656 applies — structuring to "avoid" HK nexus is precisely what s.8's marketing prong was drafted against.
- VATPs / dealers: only licensed stablecoins can be offered to retail — check the HKMA register before listing any coin.
- "Applying for licence" claims: marketing on an unfiled application is itself a risk flag — verify on the HKMA register, not the press release.
4. Official sources & reporting
| Document / report | Link |
|---|---|
| Stablecoins Ordinance (Cap. 656) | elegislation.gov.hk ↗ |
| HKMA — Stablecoin issuer licensing regime | hkma.gov.hk ↗ |
| HKMA/SFC — Joint statement on stablecoin market speculation (2025) | hkma.gov.hk ↗ |