Dozens of institutions have proactively approached the Hong Kong Monetary Authority regarding the stablecoin regulations, but many are still at the conceptual stage, its chief executive Eddie Yue Wai-man said, while warning of bubbles surrounding the tokens.
Many companies have proposed visions such as enhancing cross-border payment efficiency, supporting Web3.0 development, or improving the foreign exchange market for stablecoins, and yet they often lack practical application scenarios or feasible implementation plans, let alone the awareness and capacity to manage risks, Yue wrote in an article on the HKMA website.
Some entities that do have application scenarios lack the technical ability to issue stablecoins or the experience to manage various financial risks, he said, adding that for such players, it may be more realistic to collaborate with other stablecoin issuers by providing use cases, rather than pursuing issuance themselves.
Yue was concerned about the growing bubble trend surrounding stablecoins, noting that some listed companies—regardless of whether their core business is related to stablecoins or digital assets—have seen their stock prices and trading volumes soar simply by announcing plans to enter the stablecoin space.
He reiterated that the HKMA will approve only a limited number of stablecoin licenses when the law comes into effect next month. Investors should stay rational and think independently while digesting market “good news,” Yue said.
“Striking the right balance is the art of regulation”, the de facto central bank chief said.
While more stringent regulatory requirements may limit the short-term expansion of stablecoin businesses, they are ultimately more beneficial for the sustained and healthy development of the market and issuing institutions, Yue pointed out.
The HKMA will release a summary for the licensing regime next week, which will detail the arrangements for license applications, following an earlier public consultation on the matter, he added.
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