Hong Kong Sets Stricter Rules for Stablecoins to Gain Crypto Hub Status
A recent cryptocurrency news report revealed that Hong Kong has decided to tighten its stablecoin regulations amid the rush to become a global crypto hub in the region. The new regulation requires a minimum capital of HK$25 million to obtain a license, which is greater than Singapore’s fee. However, the new policy did not sit well with crypto firms, as USDC and USDT stablecoin issuers face challenges complying with it.
According to the report, the Hong Kong government has taken a significant step to introduce stricter rules for the stablecoins sector as it aims to lead the digital asset hub globally. Consequently, the new development, considered stricter than Singapore’s policy, has placed major stablecoin issuers, Tether (USDT) and Circle (USDC), into rigorous compliance challenges.
Furthermore, cryptocurrency enthusiasts who analyzed the new development remarked that the new policy in Hong Kong is more rigorous than what is in place in Singapore.
Hong Kong Raises Stablecoin Regulatory Standards
Moreover, the Chairman of Chainalysis’ APAC Policy, Chengyi Ong, stated that the new policy standard mandates each company that wishes to operate stablecoin-related services in the region must pay a whopping HK$25 million ($3.2 million) in capital to obtain a license. This move highlights Hong Kong’s aim to raise the standard of fiat-referenced stablecoins.
The comprehensive but strict proposal was jointly created by the Financial Services & Treasury Bureau and the Hong Kong Monetary Authority. According to the report, they aimed to protect retail investors from the high risks and increasing scam rates in the crypto industry. For instance, the policy prevents unlicensed firms from offering stablecoin transactions to retail investors in the region through regulated platforms.
Meanwhile, Ashurst’s Office Managing Partner at Hong Kong’s branch, Ben Hammod, pointed out that the licensing procedure mandated by the new policy is harsh on crypto firms, claiming that many stablecoin issuers are finding it challenging to comply with the stated criteria.
Major Stablecoin Issuers Struggle to Comply
In addition, when the announcement of the new policy surfaced, many eyebrows were raised in the crypto community as many condemned the harsh conditions of the regulation. Moreover, many crypto enthusiasts raised questions and speculations on how stablecoin giant firms like Tether and Circle would be able to maneuver the whole situation and adapt to the new rules.
Tether (USDT), which has the largest market capitalization in the stablecoins industry, is reportedly silent on the new development at the moment. However, on the other hand, Circle (USDC), the second biggest stablecoin firm, has issued a supportive statement on the current situation.
According to Circle’s Strategy & Policy Vice President, Yam Ki Chan, Circle is committed to cooperating with the new regulations that the Hong Kong Monetary Authority and the Financial Services and Treasury Bureau have introduced to regulate the stablecoins industry in the region. He added that the firm supports the growth of stablecoins as a pragmatic means of exchange and the creation of a responsible digital asset hub in Hong Kong.
Hong Kong Aims at Becoming a Global Crypto Hub
As the Hong Kong government aims to become a global hub in the region, it is important for it to create a balanced innovation in the digital asset industry to protect investors, and introducing the new regulations is a key step towards achieving its aims. The authority prioritized the creation of a safe and regulated trading environment for crypto assets, even though its stringent policy poses challenges to stablecoin issuers. Also, the development is expected to allow only a sustainable and credible crypto market in the territory.
As the global evolution of the virtual currencies landscape continues, the regulatory approach by Hong Kong could become a prototype for other regions struggling with crypto regulatory issues. Meanwhile, the effect of these regulations on helping Hong Kong achieve its aims on the global stage is yet unseen. Nonetheless, Hong Kong continues to strive to assume the leading role in the governance of virtual assets, creating a precedent for stricter regulatory standards in the fast-rising cryptocurrency industry.
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