China restricts the promotion of stablecoins despite considerable market interest.
Hong Kong and Mainland China Take Different Approaches to Stablecoin Regulation
In a global debate over stablecoins, regulators worldwide are grappling with the implications of these digital assets on monetary policy, inflation, and the banking system. Two notable examples are Hong Kong and mainland China, which have taken vastly different approaches to regulating stablecoins.
Hong Kong Embraces Stablecoin Regulation for Fintech Innovation
Effective August 1, 2025, Hong Kong has established a comprehensive regulatory framework for fiat-referenced stablecoins through the Stablecoins Ordinance. The Hong Kong Monetary Authority (HKMA) is the licensing authority for any issuer of a specified stablecoin, which is defined as a digital, cryptographically secured asset that maintains a stable value relative to a single asset or basket of assets and is used as a medium of exchange. This licensing requirement applies both to issuers operating within Hong Kong and those outside Hong Kong issuing stablecoins pegged to the Hong Kong dollar targeting the local market [1][2][3].
The regulatory framework includes requirements for reserve backing, compliance with anti-money laundering (AML) and counter-terrorism financing (CTF) laws, and cross-border coordination, particularly with mainland China’s central bank, to uphold financial stability and investor protection. Licensing applications are open as of August 1, 2025, but the HKMA has signaled a cautious, phased approach, expecting to grant initial licenses only to a limited number (3-4 entities) after a thorough vetting process, possibly delaying broader licensing until 2026 [2][3].
Mainland China Takes a Restrictive Stance on Stablecoins
In contrast, mainland China has taken a markedly restrictive stance. Chinese regulators have instructed domestic brokers to halt research publications, public commentary, seminar hosting, and promotional activities related to stablecoins. This directive targets the retail investor enthusiasm that emerged following Hong Kong’s progressive regulatory steps. The People's Bank of China (PBOC) governor has described stablecoins as presenting “significant challenges” to China’s financial regulation framework [4].
This reflects a broader tension under the “One Country, Two Systems” policy: while Hong Kong embraces a regulated stablecoin ecosystem supportive of fintech innovation, mainland China maintains stringent capital controls and restricts stablecoin activities to safeguard financial stability.
Summary
| Aspect | Hong Kong | Mainland China | |-------------------------------|--------------------------------------|-------------------------------------------| | Regulatory Framework | Comprehensive Stablecoins Ordinance; licensing required for issuers | Prohibitive stance; bans on stablecoin promotion and research | | Licensing Authority | Hong Kong Monetary Authority (HKMA) | People's Bank of China (PBOC) and other regulators | | Effective Date | August 1, 2025 | Ongoing restrictions, intensified in 2025 | | Licensing Status | Applications open; initial licenses limited and expected after 2026 | No licensing; promotional activities halted | | Compliance Requirements | Reserves, AML/CTF, cross-border coordination | Prohibition, tight control on retail participation | | Market Impact | Facilitates regulated stablecoin issuance and innovation | Restricts investor access and participation in stablecoins |
In conclusion, Hong Kong is positioning itself as a responsible fintech hub with prudential stablecoin regulation, balancing innovation with risk control. China, meanwhile, restricts stablecoin-related activities domestically, reflecting concerns about financial stability and capital control, which may limit Chinese retail investor participation in Hong Kong's regulated stablecoin market [1][2][3][4].
Elsewhere, the US and EU are also working on new rules such as the Genius Act and MiCA to make stablecoins safer while supporting innovation. Despite China's prohibition, over-the-counter (OTC) trading of digital assets in China reached $75 billion in the first nine months of 2024, showing persistent demand. It remains to be seen how these regulatory developments will shape the global landscape of stablecoins in the coming years.
Sources:
[1] South China Morning Post. (2025, May 1). Hong Kong to regulate stablecoins as it eyes digital assets hub status. Retrieved from https://www.scmp.com/business/companies/article/3184014/hong-kong-regulate-stablecoins-it-eyes-digital-assets-hub-status
[2] Financial Times. (2025, August 1). Hong Kong unveils world's first comprehensive stablecoin regulations. Retrieved from https://www.ft.com/content/62349c5b-571c-4f4a-a4b0-c0e557a70d94
[3] Reuters. (2025, August 1). Hong Kong unveils world's first comprehensive stablecoin regulations. Retrieved from https://www.reuters.com/business/finance/hong-kong-unveils-worlds-first-comprehensive-stablecoin-regulations-2025-08-01/
[4] Bloomberg. (2025, June 1). China Tells Brokers to Halt Research, Commentary on Stablecoins. Retrieved from https://www.bloomberg.com/news/articles/2025-06-01/china-tells-brokers-to-halt-research-commentary-on-stablecoins-1
- China's restrictive stance on stablecoins has led Hong Kong investors to turn towards Bitcoin options, finding alternative ways to participate in the digital asset market.
- The comprehensive regulatory framework established by Hong Kong for stablecoin trading allows financing institutions to explore diverse investing opportunities, such as fintech options and technology-driven investment strategies.
- As the European Union and the United States work on new rules to secure stablecoin investments and foster innovation, concerns about inflation and financial stability remain key factors that will continue shaping the global trading and investing landscape for these digital assets.
