Trust by Law vs. by Market: Stablecoin Lessons from Singapore and Hong Kong

As stablecoins become ever more central to digital payments, financial stability, and cross-border finance, jurisdictions around the world are racing to get the regulatory framework right. Asia’s two major financial hubs—Hong Kong and Singapore—offer contrasting but equally informative models. 

Their priorities share similarities: full reserve backing, redemption rights, AML/CFT obligations, and risk management. Their differences, meanwhile, reflect different beliefs on investor access, speed of redemption, and how much regulatory mandate vs. market flexibility should dominate.

Let’s compare how these two crypto hubs structure their stablecoin regimes and consider the tradeoffs.

Common threads in two very different playbooks

As stablecoins move from crypto niches into mainstream finance, Asia’s top financial centers are setting the tone for how trust in digital money is built. Before the contrasts, we can explore some strong common ground:

• Full reserve & backing requirements: Both regimes require issuers to make sure that outstanding stablecoins are backed by reserve assets of very high quality and liquidity. In Hong Kong, this means “specified reserve assets” must at all times equal or exceed the par value of stablecoins in circulation. Singapore’s MAS-regulated Single-Currency Stablecoins (SCS) similarly must maintain reserve assets valued at least 100% of par value, in very low-risk assets, such as cash, cash equivalents, or debt securities with maturity of ≤3 months. 
• Redemption rights at par value: Holders are legally entitled to redeem their tokens at par, without unreasonable fees or burdensome conditions. HK mandates that redemption requests be honoured within one business day (unless HKMA approves otherwise). Singapore allows five business days for the completion of redemption under its framework. 
• AML / CFT / risk management: Both enforce robust AML/CFT obligations, including customer due diligence, screening, transaction monitoring, and risk-based policies. Issuers must also show good governance, strong internal controls, and oversight.

Key differences and philosophical trade-offs

These contrasts in regulatory choices reflect different priorities when it comes to retail access, speed and certainty of redemption, and regulatory vs. market orientation. The difference between Singapore and Hong Kong shows up most clearly in a few areas:

1. Retail access. Hong Kong only permits retail issuance of fiat-referenced stablecoins from licensed entities, while Singapore’s regime is more open so long as issuers are licensed under the Payment Services Act. For users, this means HK puts protection first, while SG favors broader product availability.

2. Redemption timelines. HK requires redemption at par within one business day, while SG allows up to five. That gives HK users faster certainty but increases operational pressures on issuers; SG’s flexibility eases the burden on issuers but risks slower redemptions under stress.

3. Governance expectations. HKMA imposes strict “fit and proper” criteria for directors and controllers, along with independent audits. Singapore also sets governance standards, but with less prescriptive requirements. HK’s rigidity reduces ambiguity but may slow market entry, while SG’s flexibility can spur innovation but risks uneven quality.

4. Capital and liquidity. HK’s thresholds (minimum HKD 25 million in share capital and liquid capital buffers) are much higher than Singapore’s SGD 1 million (or 50% of operating expenses). HK’s model is resilient but raises barriers for smaller issuers; SG lowers the bar to entry, at the cost of tighter oversight needs.

5. Insolvency protections. Hong Kong law gives stablecoin holders the right to claim their reserve assets if a company goes bankrupt. In Singapore, stablecoin reserves must be kept separate and fully backed, but the law does not yet provide these rights. For holders, HK offers greater legal certainty; in SG, protection is strong but less tested.

6. Reserve assets and tokenisation. HK allows tokenised reserve assets if they meet liquidity and risk standards, while SG keeps reserves strictly to cash, cash equivalents, and short-term debt. HK’s approach supports innovation but adds complexity; SG’s priorities are simplicity and stability.

Implications & what “trust” looks like in each model

In effect, Singapore leans more toward a market-oriented model: open doors (but with licensing), more flexible timelines, regulatory clarity, but with fewer strong legal protections in place for situations involving insolvency or immediate withdrawal. Meanwhile, Hong Kong offers a trust model: tighter regulation, faster redemption, legally enforceable rights, more explicit governance, and capital requirements.

Which is “better” really depends on what you care most about:

• If you’re a retail user, HK may offer stronger protection in adverse cases and faster redemptions.
• If you’re an issuer or innovator, SG may offer lower entry barriers and more flexibility, but you must be prepared for stricter regulatory oversight and perhaps more legal ambiguity in some cases.
• If you’re a policymaker or regulator, HK’s model provides clearer guidance and is likely to perform better in detrimental situations. SG’s model is more scalable and adaptive, but it might require complementary legal safeguards to deal with systemic risks.

Strategic takeaways from the SG–HK models

So what do these regulatory choices in Singapore and Hong Kong mean for businesses building or supporting stablecoins? Given the previous perspectives, there are a few suggestions businesses can adopt to improve their compliance and development:

1. Clarify redemption promises. Make sure that your stablecoin offerings (if any) or those you support have clearly stated redemption rights, realistic timelines, and minimal conditions. If operating in both SG and HK, align with the stricter standard to reduce risk.
2. Governance and audits. Invest in solid independent audits/attestation of reserve assets, transparent disclosures (reserve composition, risk policies), and proper leadership standards. Those will become critical differentiators.
3. Custody, segregation, and insolvency protections. Make arrangements with qualified custodians, segregated reserves, and get legal clarity around what happens in insolvency scenarios.
4. Consumer education. Retail and institutional users often don’t understand the differences (such as that “five business days” vs “one business day” can matter greatly, or what “full reserve backing” means). Remember that clear communication builds trust.
5. Watch for regulatory changes. Both Hong Kong and Singapore are changing their rules. For example, SG may require more detailed disclosure and governance practices. Meanwhile, HK’s rules on implementation and enforcement, such as fit and proper tests and capital requirements, will challenge smaller companies.

The road ahead for stablecoins

Hong Kong and Singapore are both advancing stablecoin regulation in ways that reflect their financial models, legal traditions, and competitive positioning. HK chases a global crypto hub’s status with statutory clarity, faster redemption, and rigid guardrails by rolling out its stablecoin regime. SG balances risk control with market flexibility and scalability, leading to a stablecoin usage of almost $1 billion in the first half of 2024. Neither model is perfect; both involve trade-offs.

Ultimately, building trust in stablecoins will depend not just on regulation, but on execution—reliable reserves, transparent operations, clear redemption, and deep understanding of failure scenarios. And as this debate continues, the influence of Asia’s models on global standards is becoming an important topic in digital finance.

Siva will be speaking about these viewpoints further this November at the WTF Summit, Sumsub’s anti-fraud gathering and the first summit of its kind. He will join global leaders to explore how regulatory innovation across Asia is reshaping the future of stablecoins and digital assets. Don’t miss the chance to be part of the conversation shaping trust in finance for 2026 and beyond.