The recent stablecoin policy launched in Hong Kong has sparked heated discussions within the industry. This policy seems to aim at regulating the market, but in fact, it may hinder the development and application of stablecoins.

Firstly, the new policy requires users to undergo real-name KYC and to retain information for up to 5 years. Even more perplexing is that it also prohibits stablecoins from entering the DeFi ecosystem and interacting with anonymous wallets. Such strict regulations inevitably lead one to ponder, what is the essential difference between these stablecoins and traditional digital currencies? It is well known that the popularity of dollar stablecoins like USDT and USDC is largely due to their extensive use in the DeFi space. If the value-added functions of DeFi are stripped away, what motivation do users have to hold Hong Kong dollar stablecoins?
Secondly, the policy requires that institutions issuing or providing fiat-backed stablecoins to the Hong Kong retail market must be licensed. The first round of applications will close on September 30, and the first batch of licenses is expected to be issued in early 2026. This means that internationally recognized stablecoins like USDT and USDC will not only need to apply for licenses to operate in Hong Kong but also comply with a 1:1 reserve requirement and accept custodial segregation. However, taking Tether as an example, its hundreds of billions of dollars in reserves are primarily made up of government bonds, making it hard to imagine that they would entrust such a massive asset to others for management.
In the long run, if Hong Kong truly wants to make an impact in the digital currency sector, it should adopt a more inclusive and open attitude. Regulating the emerging blockchain industry with traditional financial thinking may struggle to inspire genuine innovation. Therefore, the impact of this stablecoin policy on the entire cryptocurrency industry may be minimal, and it may even produce negative effects.
As an international financial center, Hong Kong should play a leading role in the digital asset sector. However, the recent stablecoin policy seems to deviate from the core principles of blockchain technology – decentralization and financial inclusivity. In the future, achieving a balance between regulation and innovation will be a major challenge on the path of Hong Kong's digital financial development.