The layout of the digital asset sector in Hong Kong is accelerating! The highly anticipated Hong Kong "Stablecoin Regulation" will officially take effect on August 1. The Monetary Authority plans to release an outline of the "Stablecoin Issuer Licensing System" on July 28, providing more detailed guidance for applicants. Against the backdrop of a surge in the stock market surrounding stablecoin concept stocks, the President of the Hong Kong Monetary Authority, Yu Weiwen, published an article titled "Stablecoins: Steady and Far-Reaching," emphasizing the need to "avoid excessive speculation," warning against the trends of over-conceptualization and bubble formation, and reminding to strictly prevent financial risks. The implementation of this new regulation will not only bring a new landscape to Hong Kong's stablecoin market but will also have a significant impact on the development of global digital finance.
- Hong Kong Stablecoin Regulation: Countdown to Effectiveness, Monetary Authority Warns Against Excessive Speculation
The Hong Kong "Stablecoin Regulation" will officially come into effect on August 1, 2025, prohibiting the provision or promotion of unlicensed fiat-pegged stablecoins (FRS) to retail investors. Violators may face fines of up to HKD 50,000 and imprisonment for six months.
Summary of Rules to be Released: The Hong Kong Monetary Authority will publish an outline of the "Stablecoin Issuer Licensing System" on July 28, providing more detailed guidance for applicants to clarify the specific requirements for stablecoin issuers regarding anti-money laundering, reserves, information disclosure, and more.
Beware of Excessive Speculation: In his article, President Yu Weiwen pointed out that, given the enthusiastic discussions about stablecoins in the market and society over the past month, there is still a need to strengthen cooling measures and be vigilant against excessive speculation in the market and public opinion. He highlighted the issue of "over-conceptualization," noting that many institutions' understanding of stablecoins remains at the conceptual stage, lacking the technology to issue stablecoins and the experience and capability to manage various financial risks. He suggested that a more pragmatic approach for such institutions would be to collaborate with other stablecoin issuers to provide application scenarios rather than pursuing becoming issuers themselves.
Warning of "Bubble Formation": Yu Weiwen also stated that the "bubble formation trend" is worth more attention. "With the recent hype around the stablecoin concept, market sentiment has become overly exuberant. Some listed companies, regardless of whether their main business is related to stablecoins or digital assets, see their stock prices 'turn to gold' simply by claiming an intention to develop stablecoin business, leading to rising stock prices, increased trading volume, and significantly enhanced company reputation." He emphasized, "In fact, we have previously made it clear that initially, we will only approve a few stablecoin licenses at most."
Strictly Prevent Financial Risks: Hong Pi-ching, Director of the Hong Kong Financial Services Commission, also stated at a recent annual report release that stablecoins should not become objects of speculation. The digitization of asset markets is a long-distance race, and stablecoins should play a stabilizing role without short-sightedness. Hong Kong regulators have noted that there have been recent fraudulent activities promoted through digital assets and stablecoins, resulting in public losses.
- RD Technologies: Plans to Issue HKD Stablecoin on Ethereum
As one of the participants in the Monetary Authority's stablecoin issuer sandbox, Liu Yu, CEO of RD Technologies, stated in a recent interview that they intend to issue the HKD stablecoin (HKDR) on the Ethereum public chain.
Application Scenarios: The proposed stablecoin will primarily have three application scenarios: digital asset trading, cross-border trade, and asset tokenization.
Future Outlook: It is expected that within 3-5 years, operations by enterprises and individuals will become the norm.
- License Application: Possible Invitation-Only Application System, Forming a Dual-Track Regulatory Framework
Currently, there are three groups of testers in the stablecoin sandbox: RD Innovative Technology Co., Ltd., JD CoinChain Technology (Hong Kong) Co., Ltd., and a joint venture established by Standard Chartered Bank (Hong Kong), Animoca Brands, and Hong Kong Telecommunications (HKT). Recently, according to Chinese media reports, two sources indicated that the stablecoin issuer licenses will not be issued through a self-download and written application process but will be arranged in a manner similar to an invitation-only application system.
Intense Competition: Currently, 50 to 60 companies are interested in applying for Hong Kong's stablecoin licenses, including state-owned enterprises and financial institutions from mainland China, as well as internet giants.
Dual-Track Regulatory Framework: Ping An Securities released a report on stablecoins indicating that Hong Kong may form a dual-track regulatory framework of "USD stablecoins connecting internationally + HKD stablecoins connecting with mainland China," which not only consolidates the financial attributes of the HKD but also provides a "testing ground" for the internationalization of the RMB. Hong Kong's definition of the scope of stablecoins is relatively broad, not limited to any specific fiat-pegged stablecoin. With the rapid development of Hong Kong's stablecoin market, it is expected that the market share of non-USD stablecoins will gradually increase, potentially promoting the establishment of a unified international regulatory system in the future.
- Banks Competing to Serve as Custodians: A New Blue Ocean for Light Asset Business
Some institutions interested in applying for licenses have already selected custodians: Zhong An Bank and Deutsche Bank have been chosen by institutions; Standard Chartered Bank and Tianxing Bank are also potential custodians; HSBC has recently launched new virtual asset-related services; in addition, Chinese-funded banks in Hong Kong are actively deploying, with China Merchants Bank's China Merchants Yonglong Bank increasing its promotion of stablecoin custody services.
Custody Business Potential: For Hong Kong's banking industry, reserve custody business is an ideal light asset business in a low-interest-rate environment. Industry insiders estimate that the average industry custody fee ranges from 0.1% to 0.5%. Taking "stablecoin's first stock" Circle as an example, it needs to pay hundreds of millions of dollars in custody fees to custodians each year.
Tightening Regulation: Despite the broad prospects for custody business, regulation is becoming increasingly stringent. The Hong Kong Financial Services and Treasury Bureau and the Securities and Futures Commission have launched a joint public consultation on legislative proposals for licensing digital asset trading and custody service providers, aiming to strengthen the regulation of crypto asset custody business and streamline related licenses into several categories such as VATP, VAOTC, and VA Custody.
- Financing through Supply of Stablecoin Concept Stocks: Market Heat and Risks Coexist
Some stablecoin concept stocks are taking the opportunity to conduct supply financing. Zhong An Online, which has sparked this round of investment enthusiasm in stablecoin concept Hong Kong stocks, announced on June 26 plans to issue 220 million shares at HKD 18.25 per share and completed the supply on July 4, raising HKD 3.92 billion. Lianlian Digital also signed a placement agreement on July 12, intending to issue 38.4 million shares at HKD 10.25 per share, raising HKD 393.6 million. This reflects the market's enthusiasm for stablecoins and provides financing opportunities for related enterprises.
Conclusion:
With the "Stablecoin Regulation" officially taking effect on August 1, the stablecoin market in Hong Kong will welcome a new landscape. Through strict licensing systems and regulatory requirements, Hong Kong aims to ensure the healthy development of the stablecoin market and effectively prevent financial risks. RD Technologies' intention to issue HKD stablecoin on Ethereum signifies Hong Kong's active exploration in stablecoin innovation. Although the Monetary Authority warns against excessive speculation, as the market matures, stablecoins are expected to play a more important role in cross-border payments and the digital asset market in the future. This initiative in Hong Kong will not only consolidate its position as an international financial center but also provide an important reference model for the development of global digital finance.
Related Reading: Police Across Regions Issue "Stablecoin Fraud Prevention," What Does It Mean for the Crypto Industry?
Original Article: Countdown to Hong Kong's Stablecoin Regulation! RD Technologies: Plans to Launch HKD-Pegged Stablecoin on Ethereum
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