New Trends in Hong Kong's Stablecoin Regulation: Beware of Excessive Speculation, Strict Control on License Issuance

Hong Kong is set to implement the "Stablecoin Regulation," and the Financial Management Authority plans to announce detailed explanations of the "stablecoin issuer licensing system" soon. This will provide applicants with clearer guidance, particularly regarding specific requirements in areas such as anti-money laundering, reserve management, and information disclosure.

Recently, the Hong Kong stock market has seen a significant surge around stablecoin concept stocks. In response, the Chief Executive of the Hong Kong Monetary Authority, Yu Weiwen, published an article calling for "avoiding excessive speculation," warning against the trend of over-conceptualization and bubble formation, while also emphasizing the importance of preventing financial risks.

Currently, three groups of institutions are testing in the stablecoin regulatory sandbox. It is reported that five to sixty companies have expressed their intention to apply for a Hong Kong stablecoin license, including state-owned enterprises, financial institutions, and internet giants.

Yu Weiwen pointed out that the recent market discussions about stablecoins are overly heated and need to cool down further. He reminded to be cautious of two trends: first, excessive conceptualization, where many institutions are only at the conceptual stage and lack specific implementation plans; second, bubble formation, where some publicly listed companies unrelated to stablecoins have seen their stock prices soar simply by announcing their entry into the stablecoin business.

Yu Weimen emphasized that initially only a few stablecoin licenses might be approved. He also reminded that after the Stablecoin Regulations come into effect, promoting unlicensed stablecoins to the public will be considered illegal.

The Director of the Hong Kong Monetary Authority, Hong Pi-zheng, also stated that stablecoins should not become objects of speculation, but should play a stabilizing role. He believes that the digitalization of the asset market is a long-term process, and Hong Kong's development in this area has already outpaced other financial centers.

Industry analysts believe that Hong Kong may adopt a similar invitation application system to arrange the issuance of stablecoin licenses. It is expected that Hong Kong will form a dual-track regulatory framework of "USD stablecoin connecting to the international market + HKD stablecoin connecting to the mainland" in the future. This not only consolidates the financial attributes of the HKD but also provides a testing ground for the internationalization of the RMB.

With the development of the stablecoin market, the banking industry is also actively laying out custody services. Several banks have been selected as potential stablecoin custody institutions, which may become an opportunity for banks to expand new businesses and increase revenue sources.

Overall, the implementation of the "stablecoin regulations" will bring new development opportunities to Hong Kong's stablecoin market. It is expected that the role of stablecoins in cross-border payments and the digital asset market will become more prominent in the future. However, in the short term, regulators may adopt strict review standards to ensure that market participants possess sufficient technology and risk management capabilities to effectively prevent potential financial risks.