Companies in Hong Kong will no longer be allowed to promote or offer fiat-backed stablecoins to the public starting August 1 unless they have a license from the city’s financial regulator.
Violating this rule will be considered a criminal offense, with penalties of up to HK$50,000 (around $6,300) and a possible jail term of six months.
The Hong Kong Monetary Authority (HKMA) announced this new rule, known as the Stablecoin Ordinance, alongside a warning to investors on July 23. The regulator advised the public to avoid stablecoin offers that lack official approval.
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HKMA’s Chief Executive Eddie Yue explained that the rule is meant to reduce risk and build trust in the stablecoin market. He said that too many companies have been making announcements that lead to sudden price increases and high trading activity.
According to a Bloomberg report, as many as 50 firms are in the process of applying for a stablecoin license. Yue said many of these applicants contacted the HKMA directly.
However, most proposals lacked clear plans, and some were based only on ideas without showing how they would work. He noted that a number of applicants did not fully understand the risks or have the necessary skills to manage them.
While a few applications showed promise, many others lacked the necessary technical tools and financial planning to issue stablecoins properly. As a result, Yue stated that only a limited number of licenses will be issued initially.
Meanwhile, the Australian Transaction Reports and Analysis Centre (AUSTRAC) recently introduced a new strategy to tackle financial crime. How? Read the full story.
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