Hong Kong has recently proposed stringent regulations on stablecoins, a move interpreted as reflecting its ambition to become a virtual asset hub. However, this proposal may pose challenges for major stablecoins like Tether (USDT) and USD Coin (USDC), with experts suggesting that the measures could be stricter than those in Singapore, potentially putting these stablecoins at risk.
According to a report shared by the South China Morning Post, Chainalysis APAC Policy Head Chengyi Ong believes that Hong Kong’s stablecoin regulatory proposal is more severe compared to Singapore’s framework. Ong clarified that companies seeking licenses under the new framework must have a minimum paid-up capital of $3.2 million (25 million HK dollars). He also noted that the regulation aims to set a high bar for “fiat-referenced stablecoins (FRS).”
The latest 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 proposed limits aim to prevent unlicensed firms from offering stablecoin trading to individual investors in Hong Kong after the regulations are implemented.
Ben Hammond, Office Managing Partner at Ashurst’s Hong Kong office, summarized the situation by stating that obtaining a license to issue a fiat-referenced stablecoin under the proposed regime will be extremely challenging.
The situation casts doubt on how major stablecoin issuers, including Tether and Circle, will navigate the new regulations. Despite the uncertainty, Tether, the issuer of USDT—the world’s largest stablecoin by market value—has not commented on the developments. On the other hand, Circle, the issuer of USDC—the world’s second-largest stablecoin—has expressed support for Hong Kong’s proposed rules.
Yam Ki Chan, Vice President of Strategy and Policy at Circle, stated that they would work in compliance with the stablecoin regulations put forth by the HKMA and FSTB. Chan believes that the adoption of regulated stablecoins as a reliable exchange medium will support the development of a sustainable and responsible virtual asset ecosystem within Hong Kong.
