Starting August 1, Hong Kong will begin enforcing its Stablecoin Ordinance, making it a criminal offense to offer or promote unlicensed fiat-referenced stablecoins (FRS) to retail investors.
Under the new law, violators could face penalties of up to HK$50,000 (approximately US$6,300) and a maximum prison sentence of six months.
On Wednesday, the Hong Kong Monetary Authority (HKMA), the region’s central bank, issued a public warning urging investors to avoid unlicensed stablecoin products to prevent unintentionally violating the law.
HKMA Chief Executive Eddie Yue emphasized that the regulation is designed to bring greater credibility and stability to the emerging stablecoin market, while protecting investors from fraud and speculative risks.
Hong Kong clamps down on stablecoin “euphoria”
Yue noted that a market frenzy driven by hype around stablecoin announcements caused unjustified spikes in stock prices and trading volumes. “It seems necessary to further rein in the euphoria,” he stated in Wednesday’s announcement.
Bloomberg reported on Thursday that up to 50 companies have applied for stablecoin licenses. In June, shares of Guotai Junan surged 300% after its banking license was extended to cover digital assets.
Yue said that although many institutions approached the central bank expressing interest in obtaining a stablecoin license, most proposals were vague, conceptual, and lacked practical implementation plans.
“They also fail to present viable and detailed plans or implementation roadmaps, let alone show an understanding of risks and the ability to manage them,” Yue explained.
He added that while some applicants offer valid use cases, others lack the technical expertise needed to issue stablecoins and the capacity to manage financial risks.
As a result, Yue indicated that only a small number of licenses will be granted initially, and most applicants should not expect approval.
Cryptocurrency advertising regulations in other regions
Similar to Hong Kong, other regions like the European Union have banned unlicensed companies from promoting crypto products.
The EU’s Markets in Crypto-Assets Regulation (MiCA) imposes hefty financial penalties, including fines of at least 5 million euros (about $5.8 million) or between 3% and 12.5% of a company’s annual turnover for those found in violation. However, MiCA does not include imprisonment as a possible punishment.
In the United Kingdom, the Financial Conduct Authority (FCA) has faced challenges enforcing its rules, with only around half of the illegal crypto advertisements flagged being removed as of January.
Hong Kong’s stance is among the toughest worldwide, introducing criminal penalties alongside financial sanctions to protect consumers while striving to balance fintech innovation with regulatory control.
