SlowMist: Insights into Hong Kong’s New Stablecoin Regulations and Security Solutions for FRS Issuers
Background Overview
On June 26, the Hong Kong government officially released the Policy Statement on Development of Virtual Assets in Hong Kong 2.0, reaffirming its ambition to become a global hub for digital asset innovation, with fiat-referenced stablecoins (FRS) being a top priority. At the same time, the Hong Kong Monetary Authority (HKMA) is actively developing a regulatory framework for FRS, aiming to safeguard financial stability, protect user interests, and promote the healthy growth of the virtual asset ecosystem. This forward-looking initiative brings both new challenges and opportunities for FRS issuers seeking security and compliance.
As a global leader in blockchain threat intelligence, SlowMist has provided tailored, end-to-end security solutions — from threat discovery to threat defense — for many leading projects worldwide. With deep expertise in smart contract auditing, blockchain application security, AML/CFT solutions, and emergency incident response, SlowMist is well-positioned to provide comprehensive security auditing services to FRS issuers and help them meet Hong Kong’s regulatory requirements.
Key Regulatory Highlights for FRS in Hong Kong
The consultation paper released by the Financial Services and the Treasury Bureau (FSTB) of Hong Kong clearly states that FRS, due to their potential use as a means of payment, pose direct risks to monetary and financial stability, and must therefore be strictly regulated. Key regulatory requirements include, but are not limited to:
- Full Reserve Backing:
FRS must be backed 1:1 by high-quality, highly liquid reserve assets. Algorithmic stablecoins are prohibited. - Reserve Segregation and Custody:
Reserve assets must be segregated from the issuer’s own assets and held by a licensed custodian. - Robust Risk Management:
Issuers are required to implement sound strategies and internal controls to effectively manage investment and liquidity risks. - Disclosure and Reporting:
Issuers must regularly disclose FRS circulation, reserve composition, and valuation to the public, with verification by independent auditors. - Cybersecurity and Smart Contract Soundness:
Issuers must undergo external independent audits to ensure cybersecurity and the robustness of their smart contracts. - AML/CFT Compliance:
Issuers must implement robust anti-money laundering and counter-terrorism financing controls to prevent illicit activities.
These requirements demonstrate that Hong Kong’s regulatory framework not only emphasizes financial compliance but also places technical and operational security at its core.
Empowering FRS Issuers with Security and Compliance
Since its founding in 2018, SlowMist has been dedicated to building a secure blockchain ecosystem. We have conducted compliance and security audits for numerous leading exchanges and projects, including OKX, Binance, HashKey Exchange, OSL, MEEX, BGE, BTCBOX, Bitget, BHEX, YAX, and RoundCoin. In 2023, we officially launched auditing services tailored to HKSFC compliance, accumulating substantial hands-on experience.
Our technical capabilities and service offerings align closely with the regulatory requirements for FRS in Hong Kong (see reference links), providing issuers with practical compliance support and comprehensive security assurance.
1. Smart Contract Security Auditing
Core Capabilities:
SlowMist combines white-box (manual review and tool-assisted analysis), gray-box (automated tools and fuzz testing), and black-box (simulated attacker perspective) auditing methods to comprehensively assess stablecoin smart contracts. Key audit areas include mint/burn logic, on-chain reserve management, access control, redemption processes, computation accuracy, and vulnerabilities such as reentrancy and flash loan exploits.
Compliance Value:
Fulfills FSTB’s requirement for independent audits on the robustness of smart contracts, ensuring the underlying code of FRS protocols is secure, reliable, and resistant to risks like de-pegging or asset theft.
2. Operational and Infrastructure Security Auditing
Core Capabilities:
Audits cover key areas such as private key management, operational system security, and data protection. We also assess the effectiveness of emergency response plans and incident handling procedures.
Compliance Value:
Meets FSTB’s expectations for “adequate security and internal controls to ensure the safety and integrity of data and systems” as well as “robust contingency plans.”
3. AML/CFT Compliance and Risk Assessment
Core Capabilities:
SlowMist provides professional AML solutions through SlowMist AML and blockchain tracking platform MistTrack, already serving law enforcement, financial regulators, and compliance teams across Web3 projects. We assist FRS issuers in evaluating AML control designs, transaction monitoring processes, and sanctions screening, while leveraging a rich on-chain address labeling system and malicious address database to identify high-risk funds.
Compliance Value:
Ensures adherence to Hong Kong’s Anti-Money Laundering and Counter-Terrorist Financing Ordinance and HKMA guidelines, effectively preventing illicit financial activity and upholding the trust and regulatory standing of FRS issuers.
4. Continuous Security and Monitoring Services
Core Capabilities:
SlowMist offers MistEye, an integrated on-chain/off-chain security monitoring system, along with threat intelligence sharing, incident response support, and periodic re-audits and risk assessments. Our published Web3 Project Security Practice Requirements also help issuers build internal security frameworks.
Compliance Value:
Supports FSTB’s mandate for FRS issuers to conduct regular risk assessments (at least annually) and maintain continuous risk management, ensuring long-term security compliance in a dynamic blockchain environment.
Conclusion
The introduction of Hong Kong’s regulatory framework for stablecoins marks a significant step forward in global virtual asset regulation. Its clear emphasis on technical robustness, cybersecurity, and AML/CFT compliance highlights the indispensable role of professional blockchain security services in this emerging landscape.
With deep expertise in smart contract auditing, blockchain infrastructure security, AML/CFT solutions, and emergency incident response, SlowMist is uniquely positioned to support FRS issuers in meeting both regulatory and operational security needs. Beyond meeting technical audit requirements, we provide an end-to-end service suite — covering on-chain smart contracts, off-chain infrastructure, and ongoing compliance monitoring — offering holistic protection for FRS issuers.
This comprehensive approach is essential for mitigating risks at the intersection of traditional finance and decentralized blockchain systems.
We welcome interested FRS issuers to contact the SlowMist security team at team@slowmist.com to explore collaboration opportunities and jointly build a safer, more resilient blockchain ecosystem.
Reference Links
[2]https://www.fstb.gov.hk/fsb/tc/publication/consult/doc/Stablecoin_consultation_paper.pdf
[3]https://gia.info.gov.hk/general/202506/26/P2025062500847_500091_1_1750909590100.pdf
[4]https://github.com/slowmist/Web3-Project-Security-Practice-Requirements/blob/main/README_zh_CN.md
About SlowMist
SlowMist is a blockchain security firm established in January 2018. The firm was started by a team with over ten years of network security experience to become a global force. Our goal is to make the blockchain ecosystem as secure as possible for everyone. We are now a renowned international blockchain security firm that has worked on various well-known projects such as HashKey Exchange, OSL, MEEX, BGE, BTCBOX, Bitget, BHEX.SG, OKX, Binance, HTX, Amber Group, Crypto.com, etc.
SlowMist offers a variety of services that include but are not limited to security audits, threat information, defense deployment, security consultants, and other security-related services. We also offer AML (Anti-money laundering) software, MistEye (Security Monitoring) , SlowMist Hacked (Crypto hack archives), FireWall.x (Smart contract firewall) and other SaaS products. We have partnerships with domestic and international firms such as Akamai, BitDefender, RC², TianJi Partners, IPIP, etc. Our extensive work in cryptocurrency crime investigations has been cited by international organizations and government bodies, including the United Nations Security Council and the United Nations Office on Drugs and Crime.
By delivering a comprehensive security solution customized to individual projects, we can identify risks and prevent them from occurring. Our team was able to find and publish several high-risk blockchain security flaws. By doing so, we could spread awareness and raise the security standards in the blockchain ecosystem.
