Hong Kong stablecoin regulation has started, Capital Market enthusiasm cools down

On August 1, 2023, the Hong Kong "Stablecoin Ordinance" officially took effect, marking the formal establishment of the licensing system for stablecoin issuers in Hong Kong. However, the market reacted lukewarmly, and related concept stocks experienced a pullback.

Data shows that on August 1st, the concept stocks of stablecoins in Hong Kong and the mainland generally declined. Among them, several related companies' stock prices in Hong Kong fell by more than 10%, and related stocks in the A-share market also experienced a decline.

Unlike before, the Hong Kong Monetary Authority did not release any relevant information on the day the regulations came into effect. Previously, on July 29, the Hong Kong Monetary Authority had issued the licensing system document for stablecoin issuers and held a technical briefing.

At the briefing, the Hong Kong Monetary Authority stated that it expects the first batch of stablecoin issuer licenses to be issued in early 2026, while also emphasizing concerns about money laundering risks. In addition, officials from the Hong Kong Monetary Authority have repeatedly stated that they expect only a single-digit number of licenses to be issued in the first batch.

Industry experts believe that regulatory standards are stricter than market expectations, and both the timing and quantity of licenses issued are below expectations, leading to a pullback in related concept stocks. This reflects the market's adjustment of expectations regarding the implementation of Hong Kong's stablecoin policy.

A stablecoin is a special type of cryptocurrency that is typically pegged to fiat currencies or other assets to maintain a stable value. In recent years, the application prospects of stablecoins in areas such as cross-border payments have garnered significant attention from major economies worldwide.

The Deputy Chief Executive of the Hong Kong Monetary Authority stated that institutions applying for licenses need to submit a large amount of documentation, creating a heavy workload, and the regulatory authority also needs to devote equivalent effort to review. This reflects the prudent and robust regulatory attitude of the Hong Kong Monetary Authority.

The Hong Kong Monetary Authority has emphasized the regulatory requirements for anti-money laundering. According to the relevant guidelines, licensed stablecoin issuers are required to meet the requirements in areas such as risk assessment, customer due diligence, and ongoing monitoring.

Since the passage of the "stablecoin regulation draft" on May 21, the concept of stablecoins has been gaining traction in the Capital Market. Some listed companies have seen their stock prices soar simply by announcing their intention to explore stablecoin business. In response, Hong Kong Monetary Authority officials have repeatedly issued statements to "cool down" the situation.

Despite the issuance pace of licenses being slower than expected, the market is still highly focused on the issuance of licenses for the first batch of stablecoin issuers. Currently, dozens of institutions have expressed their intention to apply, including payment institutions, internet companies, and commercial banks.

Industry insiders analyze that institutions with stablecoin use cases, blockchain technology reserves, and the ability to meet regulatory compliance requirements are more likely to obtain the first batch of licenses. However, as the regulatory stance becomes clearer, market expectations are also adjusting accordingly.