After the implementation of the "Stablecoin Regulations", will Hong Kong still be able to freely buy and sell U coins?

As we all know, Hong Kong, as one of the world's financial centers, has always been at the forefront of the encryption asset field, with U-to-U exchange shops spread throughout the region. The use of encryption assets in Hong Kong can be said to have an unprecedented low threshold. Of course, the development of encryption assets in Hong Kong is not entirely wild and disorderly; important legislation is gradually being introduced.

This year, the most influential "Stablecoin Regulation" in Hong Kong has been released and will take effect on August 1, 2025. This was originally a good thing to further regulate the encryption asset industry and financial markets. However, the Sa Jie team has noticed that, with the approaching effective date, a very strange flyer incident has occurred in the Hong Kong encryption asset market, causing widespread panic.

Today, the Sa Sister team will analyze in detail, starting from this incident and the response from the Hong Kong Monetary Authority, whether it is still possible to buy and sell USDT in Hong Kong after the "Stablecoin Regulation" is officially implemented.

01 August Flyer Incident, a bizarre risk event

As the saying goes, people scare people, scaring them to death. In August, various U shops, cryptocurrency dealers, and encryption asset OTC practitioners in Hong Kong experienced a collective scare event. Moreover, a certain U merchant's owner had already left Hong Kong in person as soon as he received the news...

Here's the thing: In early August 2025, the U stores in Hong Kong suddenly received a flyer delivered by an unknown source overnight. The gist of it is that the "Stablecoin Regulation" in Hong Kong will take effect on August 1, 2025. Anyone who trades specified stablecoins (including USDT) without obtaining the relevant license; or engages in regulated stablecoin activities will be considered illegal, and violators could face a fine of HK$5,000,000 and imprisonment for 7 years.

Is this news true or false? One opinion: it's half true and half false, and the main message conveyed seems to exploit the ambiguities of the legislation itself to promote misleading information.

However, it must be noted that the "Stablecoin Regulations" may not be favorable news for many OTC cryptocurrency traders in Hong Kong.

What behavior is primarily regulated by the "Stablecoin Regulations"?

To prevent being scammed, partners must be aware of some basic concepts in the "Stablecoin Regulations" of our Hong Kong region.

(1) What is a "designated stablecoin"?

The concept of "designated stablecoin" is very important; it is one of the foundations of the entire legislation. Articles 3 and 4 of Section 1 of the "Stablecoin Regulation" clearly define two fundamental concepts: one is "stablecoin"; the other is "designated stablecoin".

The concept of "stablecoin" as stipulated in Article 3 is easy to understand and aligns with the traditional understanding of being pegged to a stable, highly liquid asset, used for (1) payment for goods or services; (2) debt repayment; (3) investment and other economically valuable virtual assets. This provision represents a broad legal definition and description of "stablecoin."

The concept of "designated stablecoin" as stipulated in Article 4 is somewhat convoluted. Partners can simply understand it as a legally defined "narrow concept of stablecoin" uniquely created by the Hong Kong "Stablecoin Regulation" to regulate related businesses. The specific original text is as follows:

When partners understand what "regulated stablecoin activities" are, they will know why the Sa Jie team said that there was serious concept substitution behavior by the flyer distributor in the August flyer incident.

(2) What is "regulated stablecoin activity"?

When partners understand what "regulated stablecoin activities" are, they will know why the Sa Jie team said that there was a serious concept substitution behavior by the flyer distributor in the August flyer incident.

According to Article 5 (1)-(2) of the Stablecoin Regulation, regulated stablecoin activities are:

In summary, the "Stablecoin Regulations" clearly state that the "regulated stablecoin activities" are actually unrelated to buying U for U exchange; what they are regulating is:

(1) Issue designated stablecoins in Hong Kong;

(2) Issuing stablecoins outside of Hong Kong, indicating that the stablecoins are fully or partially pegged to the Hong Kong dollar;

(3) Promoting stablecoin activities to the public in Hong Kong.

The above "regulated stablecoin activities" are entirely about the issuance of stablecoins, not the OTC exchange of stablecoins.

Does 03 Coin Merchant OTC belong to "offer providing" behavior?

The answer first: There is considerable controversy, and there are also grey areas. The "offer provision" in the "Stablecoin Regulations" is more inclined towards "distribution" or "underwriting" activities.

"Offer" is actually a professional legal term. Article 471 of the Civil Code states: "Parties to a contract may adopt the methods of offer, acceptance, or other means." Therefore, it is commonly understood in our country that an offer is "a statement of intention made by one party to propose the terms of a contract to the other party, hoping that the other party will accept it." In the context of Hong Kong law, an offer is also one of the key elements in the establishment of a contract.

Part 1, Article 6 of the "Stablecoin Regulation" clearly states: "Offer provision" specifies that stablecoins refer to:

According to the "Stablecoin Regulation", if the OTC behavior of entities such as coin merchants constitutes an "offer provision" behavior, then this behavior is also within the regulatory scope of the "Stablecoin Regulation". According to Article 9 of Part 2, it must be a "permitted offeror(" in order to implement the behavior of "offer provision" and "designated stablecoin".

Currently, there are only the following 5 types of "certification providers":

(1) (stablecoin) licensee;

(2) According to the Anti-Money Laundering and Terrorist Financing Ordinance ) Chapter 615 ( the Anti-Money Laundering Ordinance ) Section 53 ZRK licensed to provide virtual asset services ( defined in Section 53 ZR of the Anti-Money Laundering Ordinance ) corporation ( defined in Section 1 of Part 2 of Schedule 1 of the Anti-Money Laundering Ordinance );

(3) Persons licensed under the Payment Systems and Stored Value Payment Instruments Ordinance ( Chapter 584 ) Section 8 F;

(4) According to the Securities and Futures Ordinance ( Chapter 571 ) Securities Ordinance ( Section 116 regarding licensed corporations holding a license for Type 1 regulated activities as defined in Part 1 of Schedule 1 to the Securities Ordinance ) Section 1;

(5) Recognized Institution.

In light of the legislative purpose of the "Stablecoin Regulation", the Sa Jie team believes that the "offer" referred to in the bill is ambiguous. If this "offer" is understood according to general legal concepts, then transfer activities between individuals can also be included in the regulatory scope, which would indeed be overly extensive and could unduly increase the review obligations and regulatory difficulties for licensed platforms.

Therefore, the Sa Jie team believes that the "offer provision" in the "Stablecoin Regulations" is more inclined towards a form of "distribution" or "underwriting" behavior.

This point can be glimpsed from the provisions of Article 3.4.2 of the draft "Stablecoin Regulations" published in December 2024, which states: "......where, if a third-party entity offers specified stablecoins in Hong Kong, the licensee shall ensure that the third-party entity is an authorized provider...... Furthermore, the licensee shall also ensure that the third-party arrangements comply with the relevant laws and regulations of the applicable jurisdiction. Specifically, such arrangements shall not involve the distribution of specified stablecoins issued by the licensee in jurisdictions where the trading of specified stablecoins is prohibited."

However, the Sa Jie team must also point out that the "offer provision" in the "Stablecoin Regulation" is a general concept, and the bill itself does not restrict this concept. Therefore, theoretically, cryptocurrency merchants who do not meet the identity of "recognized providers" but actually engage in OTC activities (operational activities) are within the scope of criminal liability in Hong Kong, specifically:

(a)Upon conviction through simplified procedures - a fine of $500,000 and imprisonment for 2 years may be imposed; if it is a continuing offense, an additional fine of $10,000 may be imposed for each day during the continuation of the offense; or

(b)Once convicted through public prosecution procedures, a fine of $5,000,000 and imprisonment for 7 years may be imposed. If it is a continuing offense, an additional fine of $100,000 may be imposed for each day during which the offense continues.

Partners must be extremely cautious.

04 Written at the End

Overall, if we strictly classify according to the definition of "authorized providers" in the legislation, the entities that can clearly engage in this business are: (1) VASP license holders; (2) Hong Kong payment license holders; (3) Type 1 license holders.

Currently, the Sa Jie team has not heard of any cryptocurrency exchanges being punished for providing exchange services for stablecoins like USDT and USDC. But to be honest, we cannot assume that this means there will be no crackdown on OTC activities of exchanges and other entities in the future; after all, regulatory agencies can impose penalties according to the law. In other words, Hong Kong is no longer a paradise for free exchange of U coins. To avoid being bitten by the "teeth" of criminal law, the Sa Jie team advises partners to make plans as soon as possible: get licensed or leave.