In early July, Hong Kong's Deputy Financial Secretary Xu Zhengyu confirmed that the region will issue its first batch of stablecoin licenses within this year, and the relevant legislation, the "Stablecoin Ordinance," will officially take effect in August 2024. The Monetary Authority will announce specific regulatory guidelines within this month, including core content such as anti-money laundering and reserve requirements. This is a significant signal for the crypto market.
Although the concept of stablecoins is not new in the crypto space, with mainstream stablecoins like USDT and USDC becoming the foundation of on-chain transactions, most countries/regions around the world still have ambiguous regulations regarding them. Hong Kong's move may become the first "licensed and compliant" stablecoin testing ground in Asia and even globally.
In the past few years, the stablecoin market has experienced rapid development, but it has also exposed many issues.
The collapse of TerraUSD in 2022 made global regulators realize that stablecoins without transparent asset reserves and effective regulation pose significant risks. For the on-chain financial system, stablecoins play the role of "base currency," and once issues arise, the impact is widespread and the transmission chain is long. Hong Kong's introduction of a stablecoin licensing system aims to find a balance between fostering innovation and controlling risks. Simply put, it means "you can issue stablecoins, but you must follow the rules."
From the disclosed policy content, the licensing requirements for stablecoins will cover the following aspects:
- Must have sufficient 1:1 asset reserves
- Reserve assets must be safe, transparent, and auditable
- Issuers must fulfill KYC/AML anti-money laundering responsibilities
- Compliance, risk control, and auditing mechanisms must be established
This essentially tells the market: stablecoins are welcome, but wild growth is not.
A clear regulatory path can attract more traditional financial institutions to enter the market.
Many traditional financial institutions and tech companies want to engage in stablecoin business but have been troubled by "unclear policies." Now, Hong Kong has provided a clear plan, meaning that licensed, institutionalized, and compliant stablecoins will become mainstream, creating a compliant channel for traditional capital.
This is beneficial for the landing and circulation of stablecoins in the Asian market.
In the past, on-chain transactions mostly relied on USDT, USDC, and other "US-based stablecoins," but the regulation of these currencies is anchored in the United States, which is far from the Asian market. The issuance of licenses in Hong Kong may promote the emergence of localized stablecoins, such as Hong Kong dollar stablecoins or even stablecoins pegged to the renminbi. This will significantly enhance the convenience and liquidity of on-chain funds in the Asian region.
In the long run, it helps reduce systemic risks in the crypto financial system.
Once regulation is clear, the market will have standards to rely on. Users will know what assets they are using, whether there are reserves behind them, and whether they can protect their rights in case of issues. This establishment of "underlying trust" is crucial for the entire crypto market.
It has not yet been announced which institutions will apply for stablecoin licenses, but reasonable speculation can be made:
- Local licensed virtual asset trading platforms: For example, crypto exchanges that already have VASP licenses may have the opportunity to further expand their business;
- Traditional financial institutions testing Web3: Some banks or payment institutions may apply through subsidiaries;
- Tech companies or Web3 project teams: Teams with experience in stablecoin issuance, transparent capital reserves, and cross-border business needs may also apply for pilot programs.
It is worth mentioning that Xu Zhengyu also stated that if the stablecoin is pegged to fiat currencies from other jurisdictions (such as the renminbi), further coordination with relevant parties will be required. While this adds some policy complexity, it also means that the future issuance of renminbi stablecoins in Hong Kong is possible, which will undoubtedly expand market imagination.
Although the policy has not yet been officially implemented, the on-chain market has already begun to react.
Recently, some meme coins with names like "HKDollar" and "Hong Kong Dollar Stablecoin" suddenly went online, riding the wave of interest, with some even seeing a 24-hour increase of over 100%. Although these projects lack substantial support, it is evident that the market's attention to the topic of "Hong Kong version stablecoins" is very high. This emotional fluctuation, while not representing the fundamentals, often reflects market expectations in advance. In other words, everyone is already betting on the "implementation of stablecoin regulation."
Stablecoins are essentially a bridge connecting traditional finance and the crypto world. Hong Kong's move is not merely about issuing licenses; it is more like setting up a framework for the future "compliant Web3 infrastructure."
From the perspective of industry development, this is a positive sign, allowing those who truly have strength, reserves, and the ability to manage stablecoins to obtain a clear entry ticket; it also pressures leading stablecoins like USDT and USDC to pay more attention to transparency and regulatory compliance; more importantly, it will accelerate the construction of a compliant ecosystem in the Asian region, laying the groundwork for the next round of the crypto cycle.
In a market that is constantly seeking trust, "clear regulation" is becoming a new generation of competitiveness.
Related: World Liberty Financial initiates a community proposal to make WLFI tokens transferable.
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