Mainstream stablecoins are also to be banned in Hong Kong... (Reprinted)

Original: C Labs Lao Wang C Labs Crypto Observation
August 1, 2025 18:06

Today is August 1st, and the Hong Kong "Stablecoin Ordinance Draft" officially comes into effect. Many friends in the community are joyfully celebrating this day, but these people may be blissfully unaware, just like the Hong Kong Stock Exchange's license revocation for mainstream exchanges, Hong Kong will also phase out mainstream stablecoins. Firstly, the "Stablecoin Ordinance" stipulates that "any entity issuing 'designated stablecoins' in Hong Kong (not limited to types of coins, including fiat stablecoins pegged to the US dollar such as USDT and USDC) and promoting such stablecoins to the public in Hong Kong must obtain a license from the Hong Kong Monetary Authority (HKMA). Of course, USDT/USDC will not be banned today, as the "Stablecoin Ordinance" has specified a transition period, requiring existing issuers to apply for a license within a 6-month transition period (from August 1, 2025, to January 31, 2026), otherwise they must cease operations in Hong Kong. As for widely used stablecoins like USDT/USDC, Hong Kong has specifically introduced a "Transitional Provisions for Existing Stablecoin Issuers". It requires stablecoins that are already operational to submit their applications within 3 months after the "Stablecoin Ordinance" comes into effect, which means no later than October 31st.
Moreover, Circle or Tether may not apply for a stablecoin license in Hong Kong at all. On one hand, they are backed by the U.S., where obtaining a license is within easy reach. However, if they apply for a Hong Kong license, they not only need to submit a detailed local compliance plan (including KYC/AML and investor protection measures), but also must submit this application before October 31 of this year. Otherwise, they will be required to enter a winding-up period starting November 1 this year. During the winding-up period, the Hong Kong Monetary Authority will require: to stop new user registrations and new stablecoin issuances. Gradually liquidate the existing stablecoins held by users (such as USDT) to ensure 100% redemption. Submit a liquidation plan to the HKMA detailing asset disposal and user compensation arrangements.

If the settlement is not completed as planned, there will be a risk of six months of imprisonment. Therefore, the biggest point of interest moving forward is whether the owners of Tether and Circle will apply for a stablecoin license in Hong Kong. As of now, there is no clear evidence indicating that Circle or Tether has the intention to apply for a stablecoin license in Hong Kong. If this is the case, after the transition period ends on February 1 next year, entry-level stablecoins like USDT/USDC will also exit the Hong Kong market, just like major exchanges such as Binance and OKX.