Hong Kong’s stablecoin regulation sets out strict licensing rules, posing a threat to major industry players such as Tether and Circle.

Hong Kong recently proposed strict regulations on stablecoins, signaling its ambition to become a hub for virtual assets. However, recent developments have brought potential challenges to the popular stablecoins on the market. Experts believe the policy, which is stricter than Singapore’s, could put major players such as Tether (USDT) and USD Coin (USDC) at risk.

Experts’ views on Hong Kong’s strict stablecoin regulation

According to the South China Morning Post, Chengyi Ong, head of Asia Pacific policy at Chainaanalysis, believes that Hong Kong’s stablecoin regulatory proposals are more stringent than those in Singapore. She confirmed her claim, citing a new framework that requires companies to have a minimum paid-up capital of US$3.2 million (HK$25 million) to obtain a license. Additionally, Ong noted that the regulation highlights Hong Kong’s goal to “set high standards for fiat stablecoins (FRS).”

The latest proposals are 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 unlicensed companies from trading stablecoins with Hong Kong retail investors through regulated mediums. “Under the proposed regime, obtaining a fiat stablecoin issuer license will be extremely challenging,” said Ben Hammond, managing partner of Ashurst’s Hong Kong office.

Impact on Tether and USDC

Currently, most issuers may not even be able to meet licensing standards, Hammond said. This raises questions about whether major stablecoin issuers, including Tether and Circle, will be able to comply with the new regulations. However, Tether, the world’s largest stablecoin operator by market capitalization, has yet to respond.

Meanwhile, Circle, the operator of USDC, the world’s second-largest stablecoin, backed Hong Kong’s proposed rules. Yam Ki Chan, Circle’s vice president of strategy and policy, said they will work in compliance with the stablecoin regulations of the HKMA and FSTB. He added that the move will "support the development of regulated stablecoins as trusted medium of exchange, as well as the development of a sustainable and responsible virtual asset ecosystem in Hong Kong." #香港 #稳定币监管