Hong Kong recently proposed strict regulations on stablecoins, which is interpreted as reflecting the country’s goal to become a virtual asset hub. However, following the proposal, the latest developments suggest that the market’s leading stablecoins could face potential challenges. According to experts, the proposed policy measures are thought to be stricter than those in Singapore, and there are concerns that major stablecoins such as Tether (USDT) and USD Coin (USDC) could be at risk.
Stablecoins and Expert Opinion
According to a report shared by the South China Morning Post, Chengyi Ong, the APAC Policy Head at Chainalysis, has some interesting thoughts. Ong believes that Hong Kong’s stablecoin regulation proposal is stricter compared to Singapore’s existing framework.
Ong also clarified another point. Under the new framework, companies seeking a license must have a minimum paid-up capital of 3.2 million dollars (25 million HK dollars). Additionally, Ong stated that the regulation aims to set a high level for “fiat-referenced stablecoins (FRS)” in Hong Kong.
The recent proposal was summarized in a consultation paper jointly issued by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB).
The set limits aim to prevent unlicensed firms from offering stablecoin trading to individual investors in Hong Kong, through the environment created by the upcoming regulations.
Ben Hammond, the Office Managing Partner of Ashurst’s Hong Kong office, summarized the situation with these words:
Obtaining a license as a fiat-referenced stablecoin issuer under the proposed regime will be extremely difficult.
Impact on Tether and USD Coin
Hammond painted a bleak picture, suggesting that many current issuers might not even meet the licensing criteria as of today.
This situation creates uncertainty regarding how major stablecoin issuers, including Tether and Circle, will navigate the new regulations. Despite the uncertainty, Tether, the issuer of USDT, which is the world’s largest stablecoin by market value, has not made any statements about the developments.
Circle, the issuer of USDC, which is the world’s second-largest stablecoin, announced that it would support the rules proposed by Hong Kong. Yam Ki Chan, Vice President of Strategy and Policy at Circle, stated that they would work in compliance with the stablecoin regulations set forth by the HKMA and FSTB.
According to Chan, the adoption of regulated stablecoins as a reliable medium of exchange will support the development of a sustainable and responsible virtual asset ecosystem within the boundaries of Hong Kong.
