New rules effective 1 August 2025 sharply limit the use of stablecoins in on-chain derivatives contracts, according to DBS Hong Kong. Local chief executive Sebastian Paredes warned that the added compliance burden raises costs for small issuers and on-chain derivatives platforms, potentially shifting crypto activity to jurisdictions with lighter rules.
The Stablecoins Ordinance, passed in May 2025, requires any company issuing a Hong‑Kong‑linked fiat‑backed token to secure a licence from the Hong Kong Monetary Authority (HKMA). Each applicant must hold at least HKD 25 million in paid-up share capital, maintain a 100 percent reserve in high quality liquid assets, and run full KYC/AML checks that identify every holder. Industry notes indicate issuers will face standards close to those applied to licensed banks, and the HKMA may impose the same licensing obligation on foreign issuers whose tokens track the Hong Kong dollar.
Regulatory framework under the Stablecoins Ordinance
The HKMA will issue only a handful of licences at first — fewer than ten, with the first batch expected in early 2026. The framework also includes a ban on promoting unlicensed stablecoins, reinforcing privacy and portability constraints that cut against decentralized venues’ needs. Effective 1 August 2025, these measures set tighter reserve and liquidity requirements aimed at curbing systemic risk and money laundering.
DBS told that stablecoin activity in Hong Kong has already declined, while some firms report compliance-driven cost increases in the double digits. The ban on promoting unlicensed stablecoins and the duty to name every holder restrict the privacy and cross-chain portability that decentralized venues need, pushing smaller start-ups and DeFi protocols to the margins.
Policymakers aim to reduce systemic risk and money laundering through tighter reserves and liquidity caps, a stance that appeals to institutional funds but leaves limited room for small issuers. Large service providers, DBS included, are channeling resources toward regulated tokenized assets instead of fully on-chain stablecoin-based derivatives, and Paredes warned the city’s crypto business could tilt toward lighter-rule jurisdictions.
The HKMA plans to release the first licences in early 2026. The number awarded and the attached conditions will determine whether Hong Kong can attract institutional money while still giving innovators room to operate.
In practical terms, the regime is steering the market toward regulated tokenized assets and larger players, while smaller issuers seek exits or partnerships; the first licensing wave in early 2026 will be the key test of Hong Kong’s balance between control and innovation.
