Hong Kong’s new stablecoin law, which took effect on August 1, 2025 is raising concerns among industry participants over strict customer identification rules.

The ordinance introduces mandatory know-your-customer (KYC) checks for every stablecoin holder, a requirement that some in the cryptocurrency sector say could deter adoption and impact the city’s position as a digital finance hub.

Hong Kong is among the first markets to regulate fiat-backed stablecoin issuers.

The Hong Kong Monetary Authority said the regulations are aimed at preventing money laundering and terrorism financing.

Critics, including Bo Tang from the HKUST Institute for Financial Research, noted that the rules could make cross-border payments less efficient and reduce privacy for users.

Some observers say the requirements are stricter than those seen in recent US legislation.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ Hong Kong’s stablecoin rules exceed US standards despite competitive goals

Hong Kong’s requirement for universal KYC verification contrasts sharply with the US approach under the recently passed GENIUS Act, which focuses primarily on issuer compliance rather than end-user identification.

The GENIUS Act, signed in July 2025, mandates that stablecoin issuers maintain 1:1 reserves and comply with anti-money laundering laws, but doesn’t require KYC for every stablecoin holder 1.

This regulatory divergence is particularly notable given that both jurisdictions aim to attract digital asset businesses, with the US supporting the GENIUS Act through bipartisan legislative efforts and Hong Kong positioning itself as a “virtual asset hub” 2.

Hong Kong’s stricter approach reflects what regulators call a “more prudent approach at the initial stage,” but industry experts warn this could undermine the city’s competitive positioning in global stablecoin markets.

The contrast highlights how different regulatory philosophies are emerging even among jurisdictions actively competing for digital asset business, with Hong Kong prioritizing comprehensive oversight over market accessibility.

2️⃣ Regulatory strictness often correlates with limited market entry strategies

Hong Kong’s decision to grant only “a handful” of stablecoin licenses aligns with its comprehensive KYC requirements, suggesting a deliberate strategy to maintain tight control over market participants.