BALANCING INNOVATION AND REGULATION IN PRIVATE DIGITAL ASSET MARKETS: THE RELEVANCE OF INTERNATIONAL REGULATORY STANDARDS AND EMERGING STABLECOINS REGIME IN HONG KONG SAR

Hong Kong SAR, as one of the leading financial centres in the world, has introduced a very recent legislative framework establishing a virtual asset regulatory and licensing regime for Fiat Referenced Stablecoins (FRS) business. The objective of the paper is primarily focused on assessing how the new stablecoins regime introduced in Hong Kong in May 2025 effectively balances market facilitation and other stakeholders’ interest and to determine how the emerging standards are aligned with relevant international regulatory standards governing stablecoins. The paper assesses pertinent international regulatory iniatives on stablecoins to determine the scope and ambit of key legal definitions, principles and regulatory standards, which can be a frame of reference for regulatory evolution in individual jurisdictions. The policy debates and dilemas faced in Hong Kong in the years preceding the introduction of the new regulatory regime are examined to trace the process of refinement and its influence on the present regulatory standards. The select set of key provisions of the new Stablecoins Ordinance entering force in August 2025 are closely reviewed to identify how specific legal definitions and regulatory standards are seeking innovation and balance, while achieving broad regulatory goals.