Hong Kong warns of stablecoin asset risks

The Hong Kong financial regulatory agency has warned investors to avoid making hasty decisions regarding assets related to stablecoins, after the market witnessed a series of strong price fluctuations due to the impact of rumors, corporate announcements, and unverified claims about plans to seek licensing in this special administrative region.

In a joint statement, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) noted that they have observed sudden fluctuations in the stock prices of companies associated with the concept of stablecoin. These increases and decreases often occur following media news, social media posts, or announcements suggesting that businesses will apply for a stablecoin issuance license, engage in related activities, or explore implementation in Hong Kong. Some instances even cited discussions with the regulatory bodies.

High demand for stablecoin licensing

Hong Kong has implemented a stablecoin licensing regime since the beginning of this year, as part of its strategy to transform the city into a tightly regulated digital asset hub. The HKMA has affirmed its approach of being "strict and cautious" in the approval process, with stringent criteria and expectations that only a few applications will be approved in the early stages.

HKMA's CEO Eddie Yue stated that dozens of organizations have contacted the regulatory agency to inquire about the licensing process, but emphasized that initial discussions or mere submission of applications do not equate to the likelihood of approval. This process requires meeting criteria related to capital, governance, risk management, and operations, ensuring the safety and stability of the licensed stablecoins.

Investor Warning

The SFC advises investors to remain vigilant, conduct thorough research, and avoid making decisions based solely on short-term price fluctuations or unverified information on the internet. This agency warns that volatility due to the "pump" effect may cause individual investors to incur significant losses.

SFC CEO Julia Leung stated that the agency will continue to closely monitor trading activities through a dedicated market surveillance team, using modern systems to detect and investigate signs of manipulation. She also affirmed that the SFC will take strict action against fraudulent or misleading behaviors.

Regulatory agencies simultaneously remind businesses and market participants not to make public statements that could lead investors to misunderstand or have unrealistic expectations, emphasizing the importance of transparency and accuracy to ensure market integrity during the implementation of the stablecoin legal framework in Hong Kong.

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