Why is Hong Kong tightening the issuance of stablecoin licenses?

On February 4, the Hong Kong Monetary Authority signaled that it will issue the first batch of stablecoin licenses in March, but the number will be strictly controlled to 3-5.

In other words, among the 36 applicants, less than 15% will be able to obtain a license.

The global regulatory competition has entered the enforcement stage. However, Hong Kong's 'caution' is unique.

Does 'most compliant' necessarily mean 'most competitive'?

Is this a strategic resolve or strategic hesitation?

[ 01 | What Happened ]

Eddie Yue, the Chief Executive of the Hong Kong Monetary Authority, publicly stated that the first batch of stablecoin licenses will be issued in March, but the number will be 'very few', only 3-5.

This number has caused a stir in the industry.

Application situation comparison:
Let's look at the total number of applications: 36 institutions submitted applications for stablecoin licenses, with the first batch of licenses expected to be granted to 3-5 institutions, and the probability of obtaining a license is less than 15%.

Comparison with other regions:
Singapore's payment license system has a 'wider coverage', with a much larger number of licensed entities compared to Hong Kong's scarce strategy.

EU: Under the MiCA framework, several companies, including Circle (the issuer of USDC), have already obtained Electronic Money Institution (EMI) licenses.

USA: Under the GENIUS Act framework, federal-level stablecoin regulation is still being developed, but state-level licenses (such as New York's BitLicense) have been issued in dozens.

Hong Kong's 3-5 licenses are the most conservative number of initial licenses among major financial centers globally.

Key time nodes:
August 2025: (Stablecoin Act) officially takes effect
July 2025: HKMA establishes a public registry to monitor licensed issuers
February 2, 2026: Eddie Yue announces that licenses will be issued in March, with a 'very small' number.
March 2026 (expected): The first batch of licenses will be issued
There is a 7-month gap from the enactment of the law to the first batch of licenses. This cycle itself reflects a 'prudent' attitude.

【 02 | Scarcity creates a moat】

3-5 licenses mean that the first batch of licensed institutions will enjoy a quasi-monopoly position in the Hong Kong market.

If only 3-5 institutions can operate legally, these institutions will share the entire market cake.

When Singapore issued its first batch of payment licenses in 2020, licensed institutions (such as Coinbase and DBS Bank) quickly dominated the market.
Even when Singapore later issued more licenses, the market share of early licensees remained much higher than that of later entrants.

Perhaps the cautious approach is due to the Hong Kong financial regulators' fresh memories of the historical lessons in the crypto industry.
In 2022, the collapse of FTX resulted in heavy losses for Hong Kong users.
In 2021, multiple small crypto exchanges went bankrupt, resulting in users losing all their funds.
These events made Hong Kong regulators realize: better to be slow than chaotic.

Regulatory authorities prefer to issue fewer licenses and ensure that each licensed institution can be adequately supervised, rather than risk systemic problems after mass licensing.

At the same time, Southeast Asian countries such as Vietnam, Thailand, and the Philippines adopt a 'relatively loose + high threshold' strategy.

Vietnam: Nearly 3 billion RMB in paid-in capital, but anyone who meets the requirements can apply.
Thailand: Supports spot BTC/ETH ETFs, with tax incentives extended to 2029.
Philippines: 10 million pesos threshold, but there is no limit on the number of licensed exchanges.

Hong Kong's strategy is 'strict review + scarce quotas': even if you meet all the requirements, you may not necessarily be granted a license. This differentiated positioning allows Hong Kong to carve out a unique path in the global regulatory competition.
-Singapore: Institution-friendly, but long review period
-Vietnam/Thailand: Relatively loose, but weak financial infrastructure
-Hong Kong: Quality first, scarcity assurance
For truly capable institutions, the value of a Hong Kong license is higher.

【 03 | However, excessive scarcity may lead to market monopoly 】

3-5 licenses mean that the Hong Kong stablecoin market will be monopolized by a few institutions. This highly concentrated licensing structure is not without historical precedent.

In the early days of the Hong Kong telecommunications market, due to the limited number of licensed operators, prices remained high for a long time, until competition mechanisms were introduced and fees gradually decreased.

At the same time, 'caution' itself may also bring another layer of risk, missing the market window.

The global stablecoin market is expanding rapidly: by 2024, the total market value of global stablecoins is expected to be approximately 180 billion USD, projected to exceed 300 billion USD by the end of 2025, and could reach 400-500 billion USD by the end of 2026. At such a growth rate, whether Hong Kong can handle it with only 3-5 licenses is itself a realistic question.

If Hong Kong waits until it is ready to issue a second or third batch of licenses, jurisdictions like Singapore, Dubai, and Vietnam may have already completed market positioning and occupied major institutions and liquidity.

Moreover, among the 36 applicants, only 3-5 can obtain licenses, and the fate of the remaining 31-33 institutions is also uncertain. They may continue to wait for the second batch of licenses, but the timing and review standards are unclear; or they may turn to alternative markets like Singapore, Dubai, and Vietnam; or they may directly exit the stablecoin business, losing all compliance and application costs incurred in the early stages.

【 04 | Comparing Vietnam and China: Three regulatory logics 】

On February 4, this day, the regulatory attitudes towards stablecoins in three regions formed a sharp contrast.
Hong Kong has chosen the path of 'quality first, scarce quotas'. Of the 36 institutions that applied, only 3-5 licenses will be issued, aiming to create Asia's 'most compliant' stablecoin center through strict review and scarcity design.

Vietnam adopts a 'high threshold but unlimited quotas' model, requiring nearly 300 million RMB in paid-in capital, but anyone who meets the conditions can apply, with the core goal of attracting Web3 companies to establish a presence and become a regional development center.

China continues to adopt a one-size-fits-all regulatory logic. In November 2025, the central bank clearly classified stablecoins as virtual currencies, all illegal, with the core demand being the absolute safety of the foreign exchange management system and financial sovereignty, rather than market innovation.

Hong Kong's awkward position lies in its location. Being too open may be seen as a channel for capital flight from China; being too conservative may lead to losing out to Singapore and Southeast Asian countries in the global regulatory competition.

The 'caution' of 3-5 licenses is essentially Hong Kong seeking a balance amidst multiple pressures: internally, it needs to prove to the central government that it will not become a conduit for capital outflow; externally, it must show the international market that Hong Kong still maintains an open posture. The question is, how long can this balance be maintained?

【 05 | Who will be the first 3-5? 】

Although the HKMA has not yet announced the specific list of applicants, combined with the structure of the Hong Kong financial market and regulatory preferences, it is not difficult to speculate on the profile of the first batch of licensed institutions.

Traditional financial institutions are likely to occupy an important position, such as HSBC, Standard Chartered Bank, and Bank of China. These institutions have mature compliance systems and strong capital strength, making them the most acceptable and lowest-risk choice for regulators.

Among crypto-native institutions, those with mature compliance experience, such as Circle, which has obtained a MiCA license in the EU with a clear compliance path; Paxos, which has received approval from Singapore's MAS and has strong technology and compliance capabilities, are more advantageous. Additionally, 1-2 local crypto companies may also be included.

Relatively speaking, although Tether has the highest market share, its compliance transparency has long been controversial. Small startup companies are also clearly lacking in funding and compliance capabilities, and pure overseas institutions lacking a local Hong Kong entity do not meet regulatory preferences either.

【 06 | Final thoughts 】

Hong Kong hopes to become 'Asia's most compliant stablecoin center', but does 'most compliant' necessarily mean 'most competitive'?

Singapore, Dubai, and Vietnam are all accelerating their progress, and Hong Kong's 'caution' ultimately needs to be proven as a strategic determination rather than strategic hesitance.

Time will provide the answer.