Hong Kong’s aspirations to become a leading stablecoin hub are facing significant challenges following a recent warning from the People’s Bank of China (PBOC), which has explicitly targeted the stablecoin sector while reiterating its long-standing stance against cryptocurrency.
Beijing’s Latest Warning Targets Stablecoins
In a pointed crackdown, Beijing’s financial authorities emphasized that stablecoins do not constitute legal tender on the mainland, citing regulatory shortcomings and risks associated with illegal activities. Legal experts have indicated that this newfound focus on stablecoins could hinder Hong Kong’s efforts to establish itself as a regulated center for these digital assets.
As reported, the PBOC and several financial regulators underscored that stablecoins fall under the category of virtual currencies and are not compliant with regulatory requirements necessary for effective customer identification and anti-money laundering measures. The statement raised alarms about the potential for stablecoins to be employed in illicit activities such as money laundering and fraud.
According to analysts, this proclamation dashed previous hopes that Beijing might soften its stance towards cryptocurrencies, particularly given a global shift in regulatory attitudes towards digital assets, led by developments in the United States. A recent piece by the South China Morning Post highlighted the implications for Hong Kong’s stablecoin ambitions.
Liu Honglin, the founder of Shanghai-based Mankun Law Firm, noted that the uncertainty surrounding the regulatory environment for stablecoins has dissipated with Beijing’s clarifications. Similarly, Brian Tang, founding director of the Law, Innovation, Technology and Entrepreneurship Lab at the University of Hong Kong, indicated that applicants vying for Hong Kong’s stablecoin licenses would need to rethink their business models, especially if they intersect with mainland Chinese issuers or consumers.
Hong Kong Licenses Approval Risks Delay
This warning from Beijing adds to the challenges already facing Hong Kong’s initiative to license stablecoins. Earlier this year, the Hong Kong Monetary Authority (HKMA) introduced the Stablecoins Ordinance, which mandates that any entity looking to issue fiat-referenced stablecoins or Hong Kong Dollar-pegged tokens must secure a license from the regulator.
Multiple companies have responded to the stablecoin licensing opportunity, with over 30 applications submitted, including significant players like logistics tech firm Reitar Logtech and Ant Group’s international division. E-commerce giant JD.com has also begun testing HKD-pegged tokens as part of the HKMA’s regulatory sandbox program.
Despite the ambition, expectations for timely approvals could be tempered by the recent developments from Beijing. While the HKMA previously indicated that the first wave of stablecoin licenses would be granted at the start of 2026, some industry insiders fear that the PBOC’s recent statements may push back these timelines.
An HKMA spokesperson confirmed that they are analyzing the applications and are inclined to issue a limited number of licenses initially. However, projects involving the yuan or Chinese institutions may face further delays. “I do not foresee offshore yuan stablecoin initiatives in Hong Kong within the next one or two years due to the current regulatory climate,” the spokesperson remarked. This sentiment was echoed by Syed Musheer Ahmed, founder of FinStep Asia, who suggested that mainland institutions would need to postpone their stablecoin endeavors in the city.
As the situation unfolds, industry players will be watching closely to see how these regulatory dynamics develop and their impact on Hong Kong’s role in the global stablecoin market.
