Hong Kong is considering imposing restrictions on retail stablecoin trading for individual investors, a top official has indicated, though such activity is currently prohibited as the city weighs how to regulate cryptocurrencies.
Speaking in a recent interview, Secretary for Financial Services and the Treasury Hui Ching-yu said Hong Kong has not yet established a framework to govern the trading of stablecoins like Tether (USDT) and USD Coin (USDC). As a result, retail stablecoin trading is not allowed.
Stablecoins peg their value to fiat currencies but have experienced volatility, like May 2022’s TerraUSD (UST) collapse. Hui said retail trading may be permitted once regulators officially regulate stablecoins.
The comments come as crypto adoption grows in Hong Kong, though officials are cautioning about risks. Secretary Xu Zhengyu recently highlighted the dangers of unregulated platforms lacking transparency or reliability.
These concerns have been underscored by recent cases like the troubled local exchange JPEX, which Hui also referenced. Investigations are ongoing after JPEX users reported $180 million in losses.
The JPEX scandal emerged just weeks after Hong Kong enabled retail crypto trading in August 2023. However, authorities are making progress, recently arresting 18 suspects linked to the JPEX fraud.
Hong Kong’s efforts to explore stablecoin regulations signal a move toward a more secure crypto environment focused on protecting investors, even as the landscape remains complex for regulators and businesses. The city aims to adopt innovations like stablecoins while prioritizing market integrity.
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