Digital asset assurance goes mainstream

No longer niche

The new law heralds a new era for compliance. By requiring independent auditors to verify stablecoin reserves, Hong Kong has pushed digital asset assurance into the mainstream.

‘The Hong Kong bill raised the bar,’ says Miguel Latorre, managing director of regional corporate specialist Acclime. ‘Firms that previously viewed crypto as a niche are now building dedicated teams, combining financial audit, IT risk and regulatory compliance.’

After the bill’s passage in May 2025, the market saw a surge of interest from prospective issuers preparing applications for stablecoin licences. In July, HKMA announced that the first licences could be issued as early as 2026. A month later, Standard Chartered revealed a joint venture to issue stablecoins in Hong Kong.

The legislation fills a long-standing gap between practice and standards. With the Hong Kong Institute of Certified Public Accountants preparing a dedicated practice note, auditors now have a firmer basis for conducting engagements. ‘For issuers, expectations are clearer; and for auditors, it means more consistency in how engagements are delivered,’ says Paul McSheaffrey, senior banking partner for Hong Kong at KPMG China.

Reserve audit challenge

Despite the greater regulatory clarity, industry experts warn that verifying reserves behind these cryptocurrency tokens is still a highly complex assignment.

Across Asia, regulators have adopted differing approaches to reserve verification, creating a patchwork of frameworks. In Hong Kong, the rules emphasise licensed custodians and daily attestation. Singapore’s regime centres on systems controls, while Japan has steered toward bank-backed arrangements.

‘Each regulator defines “reserve verification” a little differently,’ Latorre says. ‘For accountancy firms, that means having to validate reserves across multiple frameworks and time zones, often with different data formats and disclosure requirements.’

Beyond reconciling assets, auditors face the question of liabilities. McSheaffrey points out that assets such as bank deposits or exchange fund bills are relatively straightforward to verify. ‘The real challenge is verifying the completeness of the liabilities,’ he says. ‘How can we be sure all stablecoins in circulation are disclosed by management and matched against the assets held to back them? That is where accountants are working in less traditional territory.’

Tech tools

Traditional audits, designed around quarterly or annual snapshots, are ill-suited for tokens that trade 24/7. Latorre says firms increasingly need ‘technology-enabled reconciliations’, which are essentially a constant run of mini-audits. Some are experimenting with blockchain-based proof-of-reserves tools, while others rely on third-party custodians that issue daily statements.

To meet these challenges in practice, McSheaffrey outlines two main approaches: direct on-chain verification, which uses blockchain explorers or bespoke tools to check supply; and a controls-based method that audits issuers’ governance over minting and burning tokens.

However, both approaches have limitations. McSheaffrey says: ‘With direct verification, the issue is data integrity; with a controls-based method, it is the robustness of the issuer’s systems. That is where professional judgment comes in.’

Under Hong Kong’s new framework, auditors must now combine traditional techniques – such as asset verification, reconciliations and control testing – with a technical understanding of blockchain systems and digital ledgers. It’s a complex balance but one seen as essential to proving that stablecoins are properly collateralised and tightly supervised.

Cross-border complexity

While crypto tokens circulate globally, asset reserves are often concentrated in a single jurisdiction. The split between where tokens trade and where their reserves are held creates challenges for auditors. They must track and verify assets across different countries’ regulatory systems, each with its own rules and financial requirements.

‘The real answer is traceability and independence,’ Latorre says. ‘Firms need systems that can confirm ownership and valuation across jurisdictions, without depending solely on the issuer’s reports.’

Ultimately, the core test remains the same: ensuring that reserves fully cover the total number of tokens in circulation. For a Hong Kong-based issuer, these reserves may be held in local banks or exchange fund instruments, but the principle of one-to-one coverage applies regardless of geography.

The digital horizon

Looking ahead, industry experts see Hong Kong positioning itself as a digital asset hub. Latorre believes it can act as a ‘regulatory bridge’ linking China, Singapore and even the Middle East, provided firms build the skills to audit not just financial statements but also custody systems, APIs and algorithms.

McSheaffrey says stablecoins are only the beginning. A well-regulated Hong Kong dollar stablecoin could create a secure settlement layer for the wider financial system. That foundation would pave the way for broader innovation, including tokenised deposits, derivatives and trading infrastructure.

‘Stablecoins bring credibility, allow institutions to participate with confidence, and reinforce Hong Kong’s role as a trusted international financial centre,’ McSheaffrey says.