Hong Kong Regulatory Crackdown: Tether & USDC Navigate Stormy Waters In The Stablecoin Arena

Hong Kong has recently introduced rigorous regulations for stablecoins, indicating its aspirations to establish itself as a virtual asset hub. Nonetheless, this recent initiative presents potential obstacles for well-known stablecoins. Analysts suggest that the regulatory framework is more stringent than Singapore’s, raising concerns for leading players such as Tether (USDT) and USD Coin (USDC).

In a South China Morning Post report, Chengyi Ong, Head of APAC Policy at Chainalysis, asserts that the stablecoin regulation proposal in Hong Kong’s stands out for its strictness compared to Singapore’s regulations.

Ong supports her statement by pointing out that the new framework mandates companies to possess a minimum paid-up capital of $3.2 million (HK$25 million) for licensing. Furthermore, she emphasizes that the regulation reflects Hong Kong’s ambition to establish a rigorous fiat-referenced stablecoins (FRS) standard.

The Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) jointly released a consultation paper outlining the latest proposal. The framework attempts to prevent unlicensed organizations from trading stablecoins on the regulated medium with retail investors in Hong Kong. According to Ben Hammond, Office Managing Partner at Ashurst’s Hong Kong office, the proposed framework will make it very difficult to obtain a license as an issuer of a fiat-referenced stablecoin.

Regulatory Landscape: Tether’s Hurdles & Circle’s Endorsement in Hong Kong

Hammond asserted that, at present, most issuers might need help to satisfy the licensing requirements. This prompts inquiries about the ability of prominent stablecoin issuers, such as Tether and Circle, to adhere to the new regulations. Notably, Tether, the entity behind the globe’s largest stablecoin in market capitalization, still needs to address this situation.

Contrary to this, Circle, the overseer of USDC, the globe’s second-largest stablecoin, is endorsing the proposed regulations in Hong Kong. Yam Ki Chan, the Vice-President of Strategy and Policy at Circle, expressed commitment to aligning with HKMA and FSTB’s guidelines on stablecoin regulation.

He emphasized that this step aims to foster the progress of regulated stablecoins as trustworthy mediums of exchange, contributing to establishing a robust and responsible virtual asset ecosystem in Hong Kong.

The author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.