The Hong Kong Monetary Authority (HKMA) has yet to implement its much-anticipated licensing regime for Hong Kong dollar (HKD)-backed stablecoins, missing the originally projected March launch. Despite earlier assurances that the first group of licensees would be announced that month, no company has yet obtained authorization. This delay has fueled uncertainty over how swiftly the regulatory framework will transition from policy formulation to actual market implementation.
HKMA’s goals and industry expectations for stablecoin regulation
In February, at an event held in Hong Kong, Financial Secretary Paul Chan Mo-po reaffirmed the city’s commitment to building a regulated crypto finance ecosystem, outlining that licenses for HKD stablecoin issuers would begin being granted in March. Officials underscored that those receiving licenses would be assessed for the innovativeness of their use cases, the sustainability of their business models, and a demonstrated capacity for compliance with robust regulatory standards.
“When considering license applications, we pay close attention to applicants’ unique use cases, the reliability and sustainability of their business models, and their strong adherence to regulatory requirements,” authorities emphasized in a statement.
According to local media reports in March, a consortium involving heavyweight financial institutions like HSBC and Standard Chartered, as well as blockchain gaming firm Animoca, was widely expected to be among the first recipients. Nevertheless, none of these entities have received official approval to date.
The legacy of the Hong Kong dollar and its influence on the stablecoin regime
HSBC and Standard Chartered wield a unique position in Hong Kong’s monetary system, being two of the main commercial banks with the authority to issue physical banknotes. Their involvement links the anticipated stablecoin framework directly to the territory’s existing monetary infrastructure, suggesting a natural bridge between traditional finance and digital innovation.
This banknote issuance model, rooted in colonial-era practices dating back to 1846, emerged in a context where no central colonial bank existed. Private banks used silver reserves as collateral to issue their own currency. Today, the process persists in a modernized form: banks authorized to issue notes must deposit U.S. dollars with the government’s Exchange Fund and receive debt certificates in exchange. For every U.S. dollar deposited, they are permitted to issue 7.80 Hong Kong dollars, sustaining a fixed exchange rate arrangement.
In a December 2023 blog post, HKMA Chief Executive Eddie Yue revisited the historical role of commercial bank-issued notes, characterizing them as a kind of “private money.” He drew parallels between these historical instruments and today’s blockchain-based stablecoins, describing them as a contemporary digital iteration of the earlier model.
The HKMA, for its part, has not provided an explanation for the delay in initiating the stablecoin licensing process. In a recent statement, the Authority clarified that work on the licensing regime is ongoing and that new information will be shared in due course.
HKMA is actively managing the licensing process, and further updates will be provided in the future, the institution stated.
