Chinese Firms Face Restrictions on Stablecoin Activities in Hong Kong Amid Regulatory Shifts

Chinese Firms Expected to Curtail Stablecoin Activities in Hong Kong Amid Regulatory Realignment

Mainland Chinese companies, including internet giants, state-owned enterprises (SOEs), and financial institutions operating in Hong Kong, are anticipated to face significant limitations regarding their involvement in stablecoin and cryptocurrency activities. This development follows reports suggesting these firms may be compelled to withdraw from crypto-related ventures in the city.

According to a report by Caixin on August 31, Chinese banks and SOEs with Hong Kong branches are likely to abstain from pursuing stablecoin licenses under Hong Kong’s recently implemented regulatory framework. Notably, this comes despite earlier indications that major banks such as HSBC and the Industrial and Commercial Bank of China (ICBC) planned to apply for such licenses. The new stablecoin regime, which became effective on August 1 with a six-month transition period, has attracted interest from 77 institutions, signaling robust initial demand.

Policy Shifts Prompt Withdrawal and Delay in Stablecoin License Applications

Sources cited by Caixin indicate that recent policy adjustments have introduced uncertainty among Chinese entities regarding their participation in Hong Kong’s stablecoin market. An anonymous senior financial industry insider conveyed that these institutions might delay or suspend their application processes amid unclear regulatory directions. This cautious stance reflects concerns about potential risk transfer and the nascent nature of Hong Kong’s stablecoin ecosystem.

Earlier in August, a subsidiary of China Merchants Bank launched an institutional crypto exchange based in Hong Kong, demonstrating initial enthusiasm from Chinese financial entities. Additionally, Chinese e-commerce conglomerate JD.com and Ant International reportedly registered entities connected to potential stablecoin projects just prior to the regulatory regime’s commencement, underscoring the sector’s early momentum.

HKMA Considers Easing Capital Requirements to Facilitate Crypto Adoption

In parallel to the restrictions, the Hong Kong Monetary Authority (HKMA) is reportedly exploring ways to simplify the regulatory environment for banks engaging with cryptocurrencies. A separate Caixin report suggests that the HKMA may lower capital adequacy requirements for banks holding crypto assets, aiming to encourage the acceptance of compliant stablecoins and promote investment in digital assets built on public blockchains.

This potential regulatory easing indicates Hong Kong’s intent to balance risk management with fostering innovation in digital finance, although official comments from the HKMA were not available at the time of reporting.

China Maintains a Cautious but Evolving Position on Stablecoins

China’s broader stance toward stablecoins remains guarded. Authorities have recently instructed domestic firms to halt stablecoin research and refrain from hosting related seminars, citing risks of fraud and illicit use. Nonetheless, reports from late August suggest that Chinese regulators may authorize yuan-backed stablecoins to advance the internationalization of the renminbi.

This tentative openness is reflected in initiatives such as the Shanghai State-owned Assets Supervision and Administration Commission’s strategic discussions on stablecoins and digital currency frameworks. Moreover, blockchain firm Conflux recently launched a yuan-backed stablecoin intended for circulation in Belt and Road countries, explicitly excluding mainland China use.

Conclusion

Hong Kong’s stablecoin market is at a critical juncture, with regulatory shifts prompting Chinese firms to reconsider their involvement amid a complex geopolitical and financial landscape. The tension between cautious regulation and innovation facilitation will likely shape the near-term trajectory of stablecoin adoption in the region.