Hong Kong's stablecoin-related stocks experienced a downturn as the region's new regulatory framework took effect on Friday, August 1, 2025. This decline is viewed by some experts as a healthy reset, reflecting a necessary market adjustment after a period of speculative enthusiasm.
Several Hong Kong-listed companies with exposure to stablecoin issuance, custody, trading, or related infrastructure saw their share prices drop. Bright Smart Securities & Commodities Group experienced a fall of nearly 20%, while Yunfeng Financial Group dropped by over 16%. Guotai Junan International Holdings slid 11%, and OSL Group declined 10.5%.
This correction occurred amidst a broader downturn in Hong Kong's financial markets, with the Hang Seng Index closing down more than 1% and the Hang Seng SmallCap Index falling 1.54%. The Hang Seng Tech Index also experienced a loss of 1.02%.
Allen Huang, a senior stablecoin policy researcher at the Hong Kong University of Science and Technology, views the stock decline as a "healthy correction". He suggests that the stablecoin frenzy had begun to spill over into other financial markets, including the equity market. Xu Han of HashKey Group emphasized that the regulatory rigor reflects a deliberate effort to prioritize systemic stability and credibility, aligning with Hong Kong's broader ambitions as a trusted digital asset hub.
The implementation of the Stablecoins Ordinance on August 1, 2025, marks a significant step in Hong Kong's efforts to establish a comprehensive regulatory framework for virtual assets. The ordinance introduces a licensing regime for fiat-referenced stablecoin (FRS) issuers, requiring any individual or entity issuing such stablecoins in Hong Kong, or those pegged to the Hong Kong dollar (HKD) regardless of where they are issued, to secure a license from the Hong Kong Monetary Authority (HKMA).
The HKMA has published guidelines on the supervision of licensed stablecoin issuers, as well as on anti-money laundering and counter-financing of terrorism (AML/CFT) obligations. Institutions interested in applying for a license are encouraged to contact the HKMA, with those adequately prepared advised to submit their applications by September 30, 2025. The HKMA will maintain a public register of licensed stablecoin issuers on its website to safeguard against potential fraud.
The new regulations require stablecoins to be fully backed by high-quality, liquid reserve assets at least equal to their par value, with proper segregation of client assets. Licensees are treated as financial institutions, requiring customer due diligence (CDD) for transactions at or above HK$8,000, enhanced monitoring for unhosted wallets, and robust risk-based governance.
The regulatory changes have triggered a sell-off, which experts describe as a rational correction to filter out speculative investors and promote long-term stability in the sector. Experts anticipate market consolidation, with smaller or speculative firms likely to exit or pause their participation in the stablecoin market due to increased compliance costs and operational challenges.
Despite the initial market jitters, the new regulatory environment is expected to attract high-quality institutions and enterprises to Hong Kong, strengthening its position as a virtual asset hub. The ordinance allows qualified institutions from various sectors, both domestic and international, to apply for licenses, balancing oversight with flexibility. Some analysts predict that larger tech firms and banks with abundant resources are more likely to become the first batch of licensed institutions. The first batch of licenses are expected to be issued in early 2026.
The strict regulatory environment could position Hong Kong as a key player in the stablecoin market, even if its stablecoin volume is unlikely to rival US dollar-backed stablecoins in the short term. The multi-currency approach to its stablecoin ordinance could allow Hong Kong to facilitate trade using other currencies beyond the US dollar.
