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Hong Kong recently proposed stringent regulations for stablecoins, signaling its ambitions to become a virtual asset hub. However, the recent development poses potential challenges for popular stablecoins in the market. Experts believe that the policy is stricter than that of Singapore and could put major players like Tether (USDT) and USD Coin (USDC) in danger.
Expert Opinion On Hong Kong’s Strict Stablecoin Regulation
According to a report by the South China Morning Post, Chengyi Ong, the Head of APAC Policy at Chainalysis, believes that the Hong Kong stablecoin regulation proposal is stringent compared to Singapore’s regulation. She affirmed her claim by citing that the new framework requires companies to have a minimum paid-up capital of $3.2 million (HK$25 million) to be licensed. In addition, Ong noted that the regulation highlights Hong Kong’s goal to “set a high bar for fiat-referenced stablecoins (FRS).”
The recent proposal was outlined in a consultation paper jointly published by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB). The framework aims to restrict companies lacking a license from trading stablecoins with Hong Kong’s retail investors via the regulated medium. “It will be extremely challenging to become licensed as an issuer of a fiat-referenced stablecoin under the proposed regime,” noted Ben Hammond, Office Managing Partner at Ashurst’s Hong Kong office.
Also Read: Tether In Crosshair Amid China’s Crackdown On Illegal Forex Trading
Impact On Tether And USD Coin
Hammond stated that currently, the majority of issuers may not even be able to meet the licensing criteria. This raises questions about whether major stablecoin issuers, including Tether and Circle, will be able to comply with the new regulations. However, Tether, the operator of the world’s largest stablecoin by market capitalization, has yet not responded to this development.
Whilst, Circle, the operator of USDC, the world’s second-largest stablecoin, is supporting Hong Kong’s proposed rules. The Vice-President of Strategy and Policy at Circle, Yam Ki Chan said that they will work in accordance with HKMA and the FSTB’s stablecoin regulation. He added that the move will “support the advancement of regulated stablecoins as a credible medium of exchange and the development of a sustainable and responsible virtual asset ecosystem in Hong Kong.”
Also Read: Hong Kong Unveils Ambitious Regulatory Framework For Stablecoins
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