Hong Kong Rules Require Identity of Every Stablecoin Holder

Today the Hong Kong Monetary Authority (HKMA) published several documents relating to the new stablecoin regulations which become effective on 1 August 2025. The regulator had warned that the anti money laundering (AML) requirements would be strict, and they are. Most of the AML document reads as expected, but one particular clause effectively requires the stablecoin issuer to identify every stablecoin holder.

In other jurisdictions, issuers perform AML and compliance on their direct counterparties, including anyone requesting a redemption. The HKMA supports the additional use of blockchain analytics to enhance compliance. However, one key clause says that it is ‘yet to be proven’ whether this is sufficient to address risks. So it concludes:

“Unless a licensee can demonstrate to the HKMA’s satisfaction that these risk mitigating measures are effective in preventing and combating ML/TF and other crimes, the identity of each individual stablecoin holder should be verified.” The issuer can either do so directly, even if it has no relationship with the holder, or the identification can be performed by an intermediary such as a crypto exchange, a bank, or some other ‘reliable’ third party.

HKMA CEO Eddie Yue hinted at this stance when he said that he didn’t expect to see significant volumes from early stablecoins owing to stringent compliance requirements. This position is reflected in today’s document, which implies it won’t apply forever, but is the regulator’s “cautious approach in the early stages of implementation.” It continued, “The HKMA will continue to evaluate the effectiveness and appropriateness of such measures considering, among other things, the evolving regulatory landscape, the advancement in relevant technology solutions and the latest international best practices.”

To back up its position, the HKMA pointed to the Bank for International Settlements’ (BIS) recent opinions about stablecoin vulnerability as well as FATF saying that some have adopted a prudent position. When a subsidiary of the French bank Societe Generale first issued its EURCV stablecoin, it also took such an approach, but later relaxed it. Most of the major jurisdictions with stablecoin laws, such as the US, Singapore and EU, do not have this requirement, although the EU does impose enhanced due diligence on certain transactions involving self-hosted wallets.