HKMA Mandates Stablecoin Compliance with ERC-3643 and Continuous KYC
From August 1, 2025, Hong Kong’s HKMA will enforce landmark AML guidelines under the new Stablecoin Regulation, embedding stablecoin compliance requirements into token architecture. Issued stablecoins must integrate compliance code—most notably via the ERC-3643 token standard—to enforce whitelist-based transfers, ensuring KYC approval and sanction screening on-chain. This approach embeds stablecoin compliance into token DNA, automating AML checks during every transaction and aligning with FATF’s travel rule. By adopting ERC-3643, issuers can freeze or restrict wallets instantly, offering regulators a real-time audit trail. The policy responds to global pushes for transparency in DeFi, as highlighted by the BIS’s warnings on “decentralization illusions.” While critics argue it restricts permissionless transactions, the framework aims to bridge DeFi and traditional finance, bolstering institutional trust and broadening legitimate use cases from retail payments to cross-border settlement.
Bullish
Embedding stablecoin compliance directly into token code enhances transparency and reduces illicit transaction risks, aligning with global AML standards. By mandating ERC-3643 and continuous KYC, Hong Kong strengthens institutional confidence, likely boosting demand for compliant stablecoins. Similar regulatory clarity in the EU and US has attracted institutional players and stabilized markets. In the short term, trading activity may rise around compliant tokens as issuers adapt; in the long term, the policy should foster sustainable growth in stablecoin use and DeFi integration, underpinning a bullish market outlook.