At the World Economic Forum in Davos, Switzerland, Hong Kong’s Financial Secretary, Paul Chan Mo-po, announced the region’s plan to issue licenses for stablecoin providers in the first quarter of this year as the city seeks to strengthen its position as a leading hub for financial technology.

Hong Kong’s Regulatory Framework

Chan highlighted Hong Kong’s regulatory framework for digital assets, describing it as “responsible and sustainable.” He emphasized the importance of a balanced approach to support the growth of both finance and technology, noting that these two sectors are “mutually reinforcing.” 

Chan articulated the benefits of digital assets, pointing out that they can enhance transparency, improve risk management, and facilitate more efficient capital movement. “We view digital assets as a financial innovation that we should embrace proactively,” he stated.

The Finance chief elaborated on the necessity of ensuring that digital assets serve the real economy while simultaneously implementing strong guardrails to mitigate risks related to financial stability, market integrity, and investor protection. 

He reiterated the principle of “same activity, same risk, same regulation,” which is designed to promote a healthy, responsible, and sustainable environment for digital asset development. The government and regulators, he asserted, will act as “market enablers,” setting a precedent for innovation.

First Stablecoin Licenses Soon

Over the past couple of yeaers, Hong Kong has prioritized strengthening its position as a fintech hub, particularly in light of the US’s efforts to fulfill President Donald Trump’s vision of establishing the country as the global centre for crypto. 

Chan pointed out that since 2023, the city has issued three batches of tokenized green bonds totaling $2.1 billion. Additionally, Hong Kong has already established a licensing framework for virtual asset trading platforms. 

Notably, last November, the Hong Kong Monetary Authority (HKMA) launched a controlled pilot program to facilitate real-value transactions using tokenized deposits and digital assets.

During his remarks, Chan specifically mentioned the upcoming licensing regime for stablecoins, indicating that the first batch of licenses is expected to be issued soon. 

According to reports from the HKMA, the authority received formal stablecoin license applications from 36 institutions by September 30, nearly half of the 77 expressions of interest recorded in August. 

Applicants for these licenses include a diverse range of entities, such as banks, technology firms, securities and asset management companies, e-commerce platforms, payment service providers, and Web3 startups.

A spokesperson for the HKMA stated that the authority will review all submission materials meticulously and conduct approvals in line with the new Stablecoin Ordinance and relevant regulatory requirements. 

While the HKMA aims to announce the first batch of licensed stablecoin issuers between the first and second quarter, it has advised that the licensing process will be stringent, with only a limited number of licenses granted during this initial phase.

Featured image from OpenArt, chart from TradingView.com 

Hong Kong’s crypto industry is warning that the city’s planned adoption of new global tax reporting rules could produce unintended consequences if regulators do not adjust how the framework is applied in practice.

The concerns center on the Crypto-Asset Reporting Framework (CARF), a standard developed by the Organisation for Economic Co-operation and Development to enable the automatic cross-border exchange of tax information related to crypto-asset transactions.

Hong Kong officials say the CARF is needed to protect the city’s role as an international financial hub, as OECD peer reviews increasingly judge jurisdictions on how well rules are enforced, not just whether they exist.

Hong Kong Weighs CARF as Industry Seeks Smoother Implementation

In a detailed submission sent this week to the Financial Services and the Treasury Bureau, the Hong Kong Securities & Futures Professionals Association urged authorities to refine how the rules are rolled out.

While the group said it broadly supports the goal of tax transparency, several elements of the proposed regime could expose local crypto firms to operational strain, legal uncertainty, and disproportionate penalties.

The association represents professionals working across securities, futures, and virtual asset markets and framed its comments as an effort to ensure Hong Kong remains competitive as a financial hub while meeting international obligations.

CARF is designed to close gaps left by existing tax reporting systems by capturing crypto-specific activity that falls outside traditional financial accounts.

Under CARF, crypto-asset service providers would be required to collect and report detailed information on users and transactions, which would then be shared automatically with other participating jurisdictions.

Hong Kong is among 76 markets that have committed to the framework and is part of the first group of 27 jurisdictions expected to begin exchanging data by 2028.

The government plans to complete legislative amendments in 2026, following a public consultation that began late last year.

Progress Welcomed, but Data Rules Raise Red Flags

Industry participants say the direction of travel is clear, but the details matter.

One major concern is data collection, as the association said most firms favor a “wider approach,” collecting information on both reportable and non-reportable clients upfront.

However, it warned that without explicit legal protection, firms could face conflicts with Hong Kong’s personal data privacy rules for holding information on clients who are not yet reportable.

Record-keeping requirements are another pressure point. While the industry accepts a six-year retention period in line with existing tax rules, it raised alarms about proposals that could hold directors or senior officers personally responsible for maintaining records after a company is dissolved.

It argued that former officers may lack the legal authority or infrastructure to securely store sensitive client data once an entity no longer exists.

Firms Push Back on CARF Fines and Tight Reporting Deadlines

Penalties under CARF and the amended CRS also drew scrutiny.

While the industry supports the introduction of administrative penalties as an alternative to criminal prosecution, it warned that fines calculated on a “per account” basis could spiral into massive liabilities for firms hit by technical or software errors affecting thousands of users.

The association called for reasonable caps for unintentional breaches and a graduated approach that distinguishes between administrative mistakes and deliberate non-compliance.

Operationally, firms welcomed plans for electronic filing but said reliance on manual XML uploads could introduce avoidable risks.

Large institutions, in particular, are pushing for direct API connections to allow automated reporting.

They also warned that the proposed five-month filing deadline after year-end could be tight in the early years and suggested grace periods as systems are tested and refined.

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