Analysis of Hong Kong Stablecoin Legislation: Clarifications of Misunderstandings and Actual Impact

The latest stablecoin legislation that has come into effect in Hong Kong has sparked widespread attention and discussion in the market. This article invites senior compliance lawyer Wu Wenqian from Hong Kong to delve into the specifics of the legislation, clarify the multiple misconceptions in the market, and explore its actual impact.

Core Misunderstanding Clarification

1. Overseas stablecoins such as USDT and USDC are not issued in Hong Kong, and therefore are not subject to the new regulations. OTC trading is still allowed in Hong Kong.

2. The legislation regulates the "issuance of stablecoins" rather than buying and selling transactions. OTC market trading of USDT and USDC is not within the scope of regulation.

3. The Monetary Authority has no authority to arbitrarily define stablecoin activities and must follow statutory procedures.

4. Whether it is recognized as "issuing stablecoins in Hong Kong" depends on multiple factors, such as the management team, company registration location, reserve assets, etc.

KYC Controversy Focus

Although regulations do not explicitly require all coin holders to complete KYC, regulatory practices prefer a closed-loop controllable model. Projects that are approved in the early stages are likely to need to implement complete KYC in a closed-loop environment.

Large Institutions Are Enthusiastic

JD.com, Ant Group, and state-owned enterprises are applying for stablecoin licenses for several reasons:

1. Acquire the "legitimacy" entry and market position
2. Speculative trading of stocks using concepts
3. Explore new business growth points

However, there are still very few projects that can be implemented. The regulators adopt a cautious attitude and will conduct preliminary screening.

Comparison of US and Hong Kong Regulations

• Hong Kong: Consistent attitude, stable but relatively conservative
• USA: Policy fluctuations are significant, and recent political changes have made it more attractive.
• In the long term, Hong Kong's policy stability may have more advantages.

Offshore Renminbi stablecoin

Currently, the Hong Kong legislation has not imposed restrictions on the Renminbi stablecoin. Offshore Renminbi is not regarded as a stablecoin and is a different concept from stablecoins issued by commercial entities. In the short term, the focus remains on Hong Kong dollar-denominated stablecoins.

Reasons for Active Participation of Banks

1. The new regulation requires that the Hong Kong dollar stablecoin reserves must be kept in banks.
2. The stablecoin business has long-term commercial potential.
3. Seeking new growth points under pressure from traditional business.

The Competitiveness and Application Prospects of Hong Kong Stablecoins

It is difficult to compete directly with USDT/USDC, but it may open up new avenues in compliant application scenarios, such as ODBA, STO, and other fields. In the future, it may form a compliant ecosystem independent of the traditional coin circle.

Impact of International Anti-Money Laundering Pressure

If the FATF is indeed going to conduct a new round of assessments on Hong Kong, it may lead to tighter regulations and stricter requirements for stablecoin real-name systems, KYC, and reserve transparency.

Hong Kong Web3 Market Heat

Recently, the Web3 atmosphere in Hong Kong has noticeably warmed up, especially as many Web2 companies start to make their moves. However, most are still in the planning stages, and there are not many projects that have truly been executed. I look forward to seeing more low-key, groundbreaking projects emerge.