In the context of regulatory transformation and broader market adjustments in Hong Kong, stablecoin companies operating in the region reported double-digit losses on Friday.
According to Google Finance data, Wisdom Securities Commodity Group fell nearly 20% on Friday. Yunfeng Financial Group dropped over 16% during the trading session, Guotai Junan International Holdings declined by 11%, and OSL Group fell by 10.5%.
These companies are referred to as "stablecoin concept companies in Hong Kong," with stock prices driven by exposure to stablecoin issuance, custody, trading, or related infrastructure. However, some local experts view this adjustment as a positive market correction.
"This is a healthy adjustment," said Allen Huang, a senior stablecoin policy researcher at the Hong Kong University of Science and Technology. "There are signs that the stablecoin craze has spread to other financial markets, including the stock market," Huang told Cointelegraph.
This adjustment comes amid a broader downturn in Hong Kong's financial markets. The Hang Seng Index closed down over 1% on Friday, while the Hang Seng Small Cap Index fell 1.54% during the trading session. The Hang Seng Tech Index dropped by 1.02%.
The decline in stock prices occurs as Hong Kong enters a six-month transition period, during which the region is moving towards a new stablecoin framework with special rules in place. The new regulations are also accompanied by plans to criminalize the promotion of unlicensed stablecoins in the region.
Huang is far from the only expert who believes this sell-off is merely a rational market dynamic.
"The sell-off of 'stablecoin concept' stocks is a rational market adjustment following months of speculative overenthusiasm," said Xu Han, director of liquidity funds at the licensed exchange HashKey Group in Hong Kong.
He explained that regulatory strictness, including requirements for one-to-one full reserves, one-day redemptions, and a minimum capital of HKD 25 million (USD 3.18 million), "is a well-considered strategy prioritizing system stability and credibility." He concluded:
"The sell-off of 'stablecoin concept' stocks today is likely a healthy adjustment following speculative gains," said Niko Demchuk, compliance director at the crypto forensics company AMLBot operating in Hong Kong. According to Demchuk, high licensing requirements and challenges faced by small companies have also put pressure on the "market recalibration."
Shukyee Ma, chief strategy officer of the tokenization company Plume based in Hong Kong, seems to agree with other experts. He summarized that "this decline represents a healthy market adjustment driven by profit-taking and regulatory clarity."
Huang stated that with the implementation of new rules, "some institutions considering trying stablecoins may decide not to continue with the process." He noted that early batch license holders would benefit from first-mover advantages, citing network effects and economies of scale. He added:
Ma indicated that the regulatory transition period will see small companies or those researching stablecoins for speculative purposes pause their efforts or shift jurisdictions. However, he expects well-capitalized participants to follow the guidelines and bear compliance costs.
Demchuk similarly anticipates that the six-month regulatory transition period will "drive capital consolidation among potential stablecoin issuers," resulting in only a few licenses being issued. He also expects banks acting as custodians to prioritize partnerships with leading license holders, further reshaping the market towards larger issuers.
Huang stated, "In the short term, the trading volume of HKD-backed stablecoins is unlikely to match that of USD-backed stablecoins." However, Ma pointed out that China holds the second-largest market share in exports, adding:
Demchuk further noted that Hong Kong's stablecoins "may gain a strategic advantage in cross-border payments and DeFi by leveraging" its status as a financial center and strict regulations. However, he stated, "Significant trading volume growth in DeFi or payments is unlikely before 2027, as market adoption and infrastructure need to develop."
Related: Hong Kong Stablecoin License Battle: Who Will Be the First to Get Approved Among Issuers Like Bank of China and Standard Chartered?
Original article: “Hong Kong Stablecoin-Related Stocks Decline Due to New Regulations, Experts Consider It a Healthy Correction”
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