After Hong Kong's strict stable coin regulation, Tether and USDC are under pressure

Stable Coin regulation in Hong Kong has strict licensing rules that pose a threat to major industry players such as Tether and Circle.

Hong Kong has recently proposed strict regulation of Stable Coins, signaling its ambition to become a virtual asset hub. However, recent developments have created potential challenges for the popular Stable Coin in the market. Experts believe that the policy, which is stricter than Singapore’s, could put major players such as Tether (USDT) and USD Coin (USDC) at risk.

Expert Views on Hong Kong’s Strict Stable Coin Regulation

According to the South China Morning Post, Chengyi Ong, head of policy for Asia Pacific at Chainaanalysis, believes that Hong Kong’s Stable Coin regulatory proposal is more stringent than Singapore’s regulation. She confirmed her claims, citing the new framework that requires companies to have a minimum paid-up capital of US$3.2 million (HK$25 million) to be permitted. In addition, Ong noted that the regulation highlights Hong Kong’s goal of “setting high standards for fiat stable coins (FRS).”

The latest proposals are outlined in a consultation paper jointly published by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB). The framework aims to restrict unlicensed companies from trading Stable Coins with Hong Kong retail investors through regulated mediums. Ben Hammond, managing partner of Ashurst’s Hong Kong office, said: "Under the proposed regime, obtaining a legal Stable Coin issuer license would be extremely challenging. ”

Impact on Tether and USDC

Currently, most issuers may not even be able to meet the licensing criteria, Hammond said. This raises questions about whether major Stable Coin issuers, including Tether and Circle, will be able to comply with the new rules. However, Tether, the world’s largest Stable Coin operator by Market Cap, has yet to respond.

Meanwhile, Circle, the operator of the world’s second-largest Stable Coin USDC, supported Hong Kong’s proposed rules. Yam Ki Chan, vice president of strategy and policy at Circle, said they will work in accordance with HKMA and FSTB’s Stable Coin regulation. He added that the move would “support the development of regulated Stable Coins as trusted medium of exchange, as well as the development of a sustainable and responsible virtual asset ecosystem in Hong Kong.” ”