The Truth About Hong Kong Stablecoin Regulation: KYC Is Not the Only Option

Recently, the regulatory topic of stablecoins in Hong Kong has sparked heated discussions. Some believe that all stablecoin holders must undergo real-name authentication, which has led to widespread controversy. However, this statement is not entirely accurate. By conducting an in-depth analysis of the "Guidelines for the Supervision of Stablecoin Issuers" and the "Anti-Money Laundering and Counter-Terrorist Financing Guidelines" issued by the Hong Kong Monetary Authority (HKMA), we can draw a more nuanced conclusion:

Not all coin holders need to undergo KYC, provided that the issuer can demonstrate that its risk control mechanisms are sufficiently effective.

This article will outline the applicable logic of stablecoin KYC from the perspectives of clients and non-clients, as well as the primary and secondary markets, clarify the true bottom line of regulation, and provide a judgment framework for project parties and compliance teams.

Distinction Between Customers and Non-Customers

In the regulatory framework of HKMA, "stablecoin holders" are not equivalent to "clients of stablecoin issuers."

According to the relevant guidelines, a "customer" is only considered when a user directly requests the issuance or redemption of a stablecoin from the issuer or has established a business relationship. This group of people needs to strictly follow the KYC/KYB process.

Users who receive, transfer, and trade stablecoins on-chain but have never interacted directly with the issuer, such as users who obtain stablecoins through decentralized exchanges or transfers between wallets, like (, are classified as "non-customer stablecoin holders" and, in principle, do not require KYC.

In other words, only institutional users in the primary market are considered clients, while participants in the secondary market are not defined as clients under the HKMA regulatory framework.

However, this does not mean that they are completely out of the regulatory view. The guidelines clearly state that issuers have a continuous monitoring obligation for all circulating stablecoins, including those held by both customers and non-customers.

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KYC is not the only way, but it is the regulatory bottom line

The HKMA has set an important premise: non-customer stablecoin holders can skip KYC, but the issuer must establish an effective on-chain risk control mechanism and be able to demonstrate to regulators that it is sufficient to prevent money laundering and terrorism financing risks.

In other words, KYC is not the only means, but it is the last line of defense.

If the issuer uses methods such as blockchain analysis tools, address blacklists, transaction risk scoring, wallet profiling, and freezing mechanisms to monitor the flow and use of coins, and can satisfy the HKMA, then these technical risk control measures can serve as alternatives, and it is not necessary to enforce KYC for all coin holders one by one.

However, if this cannot be achieved, or if these measures prove insufficient to mitigate risks in practice, then regulatory expectations will automatically revert to the most conservative option—implementing identity verification for all coin holders, regardless of whether they are customers. It is worth noting that even if KYC is required for coin holders, stablecoin issuers can delegate the KYC process to virtual asset service providers and trusted third parties.

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Choices Facing Issuers

For stablecoin issuers, this is essentially a "choose one" compliance dilemma:

1. Establish a comprehensive risk monitoring system covering the entire chain, including real-time address profiling, suspicious transaction identification, blacklist interception, freezing mechanisms, and suspicious transaction reporting submission processes;

2. Accept a more direct but costly solution: perform KYC on all coin holders, even if they have only received a stablecoin on the chain.

From a regulatory perspective, this design links technical capabilities with regulatory obligations: issuers may not need to verify the identity of every user, but they must have the ability to control risks. Otherwise, they must revert to the most primitive method - conducting KYC.

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Conclusion: Balancing Technological Innovation and Regulation

The regulation of stablecoins is not about blocking technology, but about establishing a clear red line:

Issuers can choose technical solutions to replace real-name verification, but cannot evade the responsibility of risk control.

For issuers, the most critical question is not "Should we do KYC?" but rather—do you have the capability to convince the HKMA that you can do without it.

Under the principle of "same activities, same risks, same regulations", stablecoins, as a quasi-payment tool, are moving towards the same compliance requirements as traditional finance. For Web3 projects, this is not the end, but a new starting point: regulations are clear, and the technology should be submitted.

The regulatory framework in Hong Kong provides a viable path for the development of stablecoins, taking into account the characteristics of decentralization while also addressing the need for risk control. It offers the industry a direction to consider: how to meet regulatory requirements through technological innovation while maintaining the core value of cryptocurrencies. This may become an important reference for global stablecoin regulation in the future.

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