Hong Kong’s Stablecoin Law Is Now in Effect — Is This the Rise of Eastern Stablecoins?

Hong Kong’s landmark "Stablecoin Ordinance" officially comes into force, August 1, 2025, marking a transformative milestone for digital assets across Asia. This significant move occurs less than four years after mainland China imposed a sweeping ban on cryptocurrencies in September 2021.

On July 29, the Hong Kong Monetary Authority (HKMA) released the finalized guidelines for stablecoin issuers, detailing supervision protocols, anti-money laundering requirements, licensing processes, and transitional arrangements for existing issuers. The framework establishes a rigorous regime mandating full reserve backing, redemption guarantees, and comprehensive audit obligations.

As of August 2025, no stablecoin licenses have yet been granted. The HKMA anticipates issuing the first batch in early 2026, with only a handful of licenses—likely single digits—expected initially. Notably, major Asian fintech and e-commerce players such as RD Technologies, Standard Chartered in collaboration with Animoca and HKT, and JD.com’s JDCNY payments division have already shown strong interest.

This regulatory milestone raises pivotal questions about the future trajectory of digital assets in Asia: Is Hong Kong poised to become the new crypto hub of the East? Does this signify a potential softening of China’s crypto stance? And what implications will this have for the global stablecoin market, currently dominated by USD-pegged tokens?

The timing is especially consequential given recent advances by mainland Chinese firms. On July 29, 2024, Hong Kong media outlet Ming Pao reported that JD Blockchain had registered the trademarks "JCOIN" and "JOYCOIN." Meanwhile, RD Technologies, among the first sandbox participants under the HKMA pilot scheme, secured a US $40 million Series A2 funding round and is positioning its HKDR stablecoin for regulatory approval and real-world deployment in Hong Kong.

This article explores Hong Kong’s new stablecoin regulatory framework within the context of China’s stablecoin evolution, analyzing recent developments and what the future may hold for Eastern stablecoins.

The China Story of Stablecoins: From Prosperity to Prohibition

China’s interaction with cryptocurrencies has been tumultuous, evolving from early rapid growth to sweeping bans. This arc underscores Beijing’s cautious view on financial innovation and its firm defense of monetary sovereignty.

Early Prosperity (2016–2017) By 2016 and into early 2017, Chinese exchanges including Huobi, OKCoin, and BTCC accounted for the vast majority—estimates as high as 90%—of global Bitcoin trading volume. At the time, stablecoins were only beginning to emerge in global markets, with Tether (USDT) not yet widely used in China.

On September 4, 2017, the People’s Bank of China (PBOC) and six other agencies issued the “Announcement on Preventing Token Issuance Financing Risks,” effectively banning ICOs and disabling domestic crypto trading. Major exchanges were subsequently forced to cease yuan-based operations, prompting many to relocate offshore.

The Rise of USDT and the Regulatory Gray Zone (2018–2020) Despite the crackdown, USDT use among Chinese traders surged in informal OTC markets. Chainalysis reported substantial OTC activity in the region and noted Tether’s role as the primary stablecoin flow in East Asia. China’s regulatory stance remained ambiguous—stablecoins were neither explicitly banned nor formally regulated—creating a prolonged gray zone.

Digital Yuan and the Comprehensive Ban (2020–2021) In April 2020, the PBOC’s Digital Currency Research Institute initiated closed pilot tests of the digital yuan (e-CNY), signaling strategic commitment to sovereign digital currency infrastructure.

On September 24, 2021, the PBOC and nine authorities jointly released the “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Speculation.” This prohibition classified all crypto-related operations—including trading, token issuance, pricing services, and derivatives—as “illegal financial activity”. The announcement sent shockwaves through the crypto ecosystem, triggering an immediate ~8% decline in Bitcoin’s price to just over $41,000.

Market Response After the Ban Following China’s comprehensive ban on cryptocurrency trading and mining in September 2021, public crypto activity sharply declined, with transactions shifting to OTC channels, particularly USDT and other stablecoins. Chainalysis’ 2022 Global Crypto Adoption Index ranks China among the top ten globally, leading in centralized service transaction volume, indicating the ban’s limited impact on user engagement.

At the same time, the regulatory crackdown did not diminish China’s commitment to blockchain. In October 2021, the 14th Five-Year Plan designated blockchain as a strategic “frontier technology,” contrasting sharply with tight restrictions on cryptocurrency trading.

With Hong Kong now charting a more open regulatory path and Chinese firms like JD.com piloting blockchain-based payment solutions, China’s stablecoin narrative appears poised to enter a new phase.

This arc—from early prosperity to outright prohibition—not only defined China’s distinct crypto ecosystem but also sets the stage for the rise of Eastern stablecoins.

The Turning Point: Hong Kong's Stablecoin Pioneers

As mainland China continues to enforce strict regulations on cryptocurrencies, Hong Kong has emerged as a strategic gateway for Chinese enterprises seeking compliant pathways into the stablecoin market.

With the city's new stablecoin licensing framework taking effect on August 1, 2025, two early movers—RD Technologies and JD.com—have positioned themselves at the forefront of this transformation.

RD Technologies: Pioneering Ethereum-Based HKD Stablecoins

Founded in late 2022, RD Technologies is making history with its plan to issue HKDR, a Hong Kong dollar-pegged stablecoin, on the Ethereum blockchain. This initiative marks a significant departure from China's prior blockchain playbook, which largely confined experimentation to permissioned networks.

HKDR is the first major fiat-backed stablecoin from a Chinese-backed entity to be launched on a public blockchain—signaling a bold shift in institutional strategy. The announcement was quickly followed by a $40 million Series A2 funding round, led by ZA Global (ZhongAn Insurance’s international arm), China Harbour, Bright Venture, and Hivemind Capital. Additional investors included Sequoia China (HSG), Eternal Digital Capital, Jun Investment, and Guotai Junan International.

RD Technologies plans to use the funding to scale its platform and prepare for regulatory approval under Hong Kong’s stablecoin regime. In a key milestone for institutional adoption, ZA Bank signed a memorandum of cooperation with RD to jointly explore compliant applications of stablecoins in custody and distribution.

JD.com’s Stablecoin Ambitions: JCOIN and JOYCOIN

As one of China's largest e-commerce and technology giants, JD.com is making a strong push into the stablecoin space ahead of the regulatory rollout.

On July 29, 2024, Hong Kong media outlet Ming Pao reported that JD Blockchain had registered the trademarks “JCOIN” and “JOYCOIN,” widely interpreted as the company’s upcoming stablecoin brands. The filings cover services such as blockchain-based fund transfers and cryptocurrency financial transactions.

JD Blockchain was selected for the HKMA’s stablecoin sandbox in 2023, giving it a critical head start in understanding compliance requirements. By June 2024, JD had begun testing a HKD-pegged stablecoin within the sandbox and was experimenting with other fiat-backed variants.

“The sandbox program has allowed us to collaborate closely with regulators to ensure our payment solutions align with compliance expectations while solving real business needs,” said Liu Peng, Head of JD Technology, at a fintech conference in Hong Kong.

Unlike most crypto-native projects, JD leverages an expansive corporate ecosystem:

• JD.com: Over 580 million active e-commerce users and 250,000+ suppliers

• JD Technology: Fintech and blockchain innovation unit

• JD Logistics: One of China’s largest logistics providers

• Global partnerships: Especially in Southeast Asia and Europe

This ecosystem creates immediate use cases for stablecoins in cross-border e-commerce, supply chain finance, and merchant settlements—anchoring JD’s stablecoin strategy in real-world utility and compliance readiness.

Hong Kong's New Regulations: The Compliance Gateway for Eastern Stablecoins

While corporate pioneers like JD.com and RD Technologies have taken bold steps into Hong Kong’s stablecoin space, their ambitions are unfolding within a fast-evolving regulatory environment. On July 29, 2024, the Hong Kong Monetary Authority released a comprehensive package of regulatory documents to support the implementation of its stablecoin licensing regime, which officially comes into force on August 1, 2025. Together with the “Stablecoin Ordinance” passed by the Legislative Council in May, this framework establishes the legal foundation for the next phase of stablecoin development in the city.

The regime adopts a hybrid “principles + rules” model, offering detailed compliance requirements for critical risk areas—such as reserve asset management and private key security—while retaining flexibility in implementation methods. Key features include a HK$25 million minimum capital threshold, a dual safeguard mechanism of 100% reserve backing plus over-collateralization, strict private key custody protocols, and T+1 redemption obligations.

This framework reflects a deep regulatory understanding of stablecoins as critical financial infrastructure—designed to bridge traditional finance and the digital asset economy. It also sends a clear message to the market: Hong Kong welcomes responsible innovation, but only within a well-supervised, tightly controlled environment.

Crucially, this clarity in regulatory standards offers more than just legal certainty—it also creates space for innovation. When the rules of the game are known, compliance costs become predictable, and the boundaries of experimentation become defined. This disciplined yet dynamic approach could prove essential to Hong Kong’s competitiveness as a global financial center in the digital era.

As the city opens its regulatory gateway to Eastern stablecoin innovation, a more pressing question emerges: who will ultimately define the next chapter of Asia’s digital currency landscape? In the following sections, we examine the opportunities and challenges that await the region’s stablecoin pioneers.

Market Opportunities: Institutional Capital and Regulatory Clarity

Institutional Capital Goes Mainstream

The year 2025 marks a pivotal turning point for blockchain and digital assets, as institutional capital flows into the sector at record-breaking levels. According to the 2025 Institutional Investor Digital Assets Survey conducted by EY-Parthenon and Coinbase, 59% of institutional investors now plan to allocate over 5% of their portfolios to digital assets—up from 52% in 2024, and more than double the 24% figure reported in 2023. This trend represents a potential influx of up to $1.8 trillion in capital across the ecosystem.

This surge in capital is underpinned by three structural drivers:

• Institutional-grade custody solutions have significantly reduced security concerns, especially with regulated third-party custodians entering the market.

• Regulated derivatives markets now offer familiar instruments—such as futures and options—for managing digital asset risk, increasing institutional comfort.

• Mainstream financial institutions are expanding crypto integration: asset managers, banks, and brokers now offer access to spot crypto, ETPs, and staking through traditional investment channels.

Corporate adoption is also gaining momentum. The EY report that 84% of institutional investors either already use or are interested in using stablecoins, treating them as tools for strategic finance rather than speculative instruments.

Regulatory Clarity Unlocks Growth

Global regulatory clarity has evolved from ambiguity to architecture, enabling broader and more sustained institutional participation.

Hong Kong’s stablecoin licensing framework—officially launched in August 2025—has become a global reference for how to operationalize regulation without stifling innovation. The “Stablecoin Ordinance,” passed in May, requires fiat-backed stablecoin issuers to meet strict conditions: full reserve backing, minimum capital thresholds, real-time redemption guarantees, and independent audits.

This legal clarity has already had visible market impact. Hong Kong–listed crypto-exposed companies have surged in value following the regime’s rollout. Notably:

The optimism is echoed by capital flows. In Q1 2025 alone, venture capitalists invested $4.8 billion into crypto and blockchain startups—a 54% quarter-over-quarter increase—with stablecoin infrastructure and custodial technology in Hong Kong receiving a sizable share.

Global Alignment and Strategic Tech Convergence

Globally, jurisdictions are aligning around a set of core principles. The EU’s MiCA regulation offers unified rules for digital asset service providers, and the U.S. SEC has now clarified token classifications, distinguishing utility tokens from securities—removing a long-standing compliance barrier.

Technological convergence is further accelerating institutional use cases. Blockchain's integration with AI is powering the evolution of autonomous DAOs, while IoT integration is enabling machine-to-machine payments and real-time supply chain tracking.

A final frontier lies in Central Bank Digital Currencies (CBDCs). As of mid-2025, 18 major economies have either launched or are actively piloting CBDCs. These efforts not only legitimize blockchain infrastructure but also establish new pathways for stablecoin interoperability and institutional integration.

Market Challenges: Technical Bottlenecks and User Experience Barriers

Technical Limitations Constrain Mass Adoption

Despite strong market enthusiasm, several critical technical challenges remain unresolved. Scalability issues continue to hinder mainstream blockchain adoption, with major networks often facing congestion during peak usage and unpredictable spikes in transaction fees. Layer-2 scaling solutions have multiplied but also fragmented the ecosystem, creating user confusion and liquidity fragmentation. Ethereum alone supports over 20 different scaling solutions, each with varying security models and bridging protocols, posing significant obstacles for new users and institutional participants. Cross-chain interoperability remains a significant hurdle. While standards like the Cross-Chain Interoperability Protocol (CCIP) have enhanced security, the fundamental challenge of secure, seamless cross-chain communication still limits the vision of a fully integrated blockchain ecosystem.

User Experience as the Adoption Bottleneck

The complexity of blockchain interactions continues to impede widespread adoption. According to recent industry reports, around 67% of potential users abandon dApps during their initial interaction, citing confusing interfaces, uncertain gas fees, and security concerns. Wallet security remains a major obstacle, as managing private keys presents a steep learning curve for average users. Although innovations like social recovery and multi-party computation offer improvements, they have yet to deliver the ease of use necessary for mass adoption. The industry continues to wrestle with balancing security and usability.

Future Challenges in Regulatory Balance

Looking ahead, the crypto industry must carefully balance regulation with innovation. A 2025 Coinbase and EY-Parthenon survey reveals that 68% of institutional investors see greater regulatory clarity as the next catalyst for growth of the digital-asset industry, while 52% cite the developing regulatory outlook as their top concern. This ongoing tension will shape the regulatory environment in the coming years.

Moving forward, the most promising projects will be those that pair technical innovation with real-world utility while maintaining strong compliance. Companies must solve actual business problems, work within regulatory frameworks, and uphold decentralization principles to succeed in this evolving landscape.