- HKMA is strict with licensing stablecoins (AML).
- Audit and senior management are institutional controls.
- Technical compliance requires constant transaction surveillance.
Hong Kong is rewriting the rules for stablecoin issuers. The new regulatory structure is anti-money laundering and counter-terrorism financing (AML/CFT). These three policies of the policy trilogy, institutional implementation, and tech compliance, are meant to stabilize the new crypto market in the city.
The new law enacted in May 2025 makes it compulsory to license issuers of fiat-backed stablecoins. The Hong Kong Monetary Authority (HKMA) will supervise the compliance and instill high standards. These are risk assessment, governance, customer due diligence, and transaction monitoring.
The AML/CFT “Trilogy” Demystified: Policy, Practice, and Technology
The AML/CFT approach of Hong Kong provides a triple shield against issuers of stablecoins. To begin with, there exist transparent policies regarding minimal licensing requirements and necessary protection against money laundering and terrorist funding.
Second, there are institutional controls in place to guarantee accountability of senior management, internal reviews, and periodic training of the staff. Third, the technical solutions require constant screening of transactions and identification of safe wallets.
Importantly, newcomer operators will need to distinguish between custodial wallets that are under regulation and unhosted wallets.
A higher level of scrutiny is imposed on unhosted wallets to avoid illicit use, such as transaction and transfer limits. Operators are also required to adhere to the so-called Travel Rule by disclosing sender and recipient details on transactions that exceed specific limits.
Crypto Sector Faces Compliance Challenge Under Tightening Rules
The regulations raise the position of Hong Kong as a reputable fintech center, but crypto companies need to adjust immediately. The HKMA only anticipates a small number of licenses issued in the first place, which is an indication of significant entry barriers.
The most stringent challenges for startups and tech firms are on AML controls, asset management, and redemption guarantees on reserves.
The Hong Kong-based comprehensive regime is one of the most elaborate AML/CFT blueprints of stablecoins in the world. The objective is to protect financial stability and the protection of investors and to promote innovation.
Nevertheless, the technicalities and expenses of the regulatory adoption pose significant threats to crypto players who have not yet adhered to institutional and technical standards.
As regulators around the world turn their attention to stablecoins, the approach taken by Hong Kong could become the first example. It indicates a shift towards less freely traded crypto markets to the rigorously regulated ones that incorporate policy, institutional compliance, and technology-enabled compliance.
