Thomas Daniels
A senior official at the Hong Kong Securities and Futures Commission (SFC) has warned of heightened fraud risks following the enforcement of the city’s new stablecoin regulatory framework. Ye Zhiheng, Executive Director of the Intermediaries Division, cautioned that the introduction of the Stablecoin Ordinance on August 1, 2025, has spurred speculation-driven volatility and irrational investor behavior.
Ye noted that some companies saw significant increases in share prices merely by announcing plans to apply for a stablecoin issuer license—a sign of market sentiment being influenced more by hype than regulatory substance. Following the new law’s implementation, several Hong Kong-based stablecoin firms recorded double-digit losses. Analysts interpreted the sell-off as a necessary correction, prompted by unexpectedly stringent issuer requirements.
On August 14, 2025, the SFC and the Hong Kong Monetary Authority (HKMA) issued a joint statement addressing sharp market movements linked to “stablecoin concepts.” The regulators cited announcements, media reports, and speculative social media activity about potential stablecoin initiatives as drivers behind recent market volatility.
Authorities emphasized that expressing interest in a license or engaging in preliminary discussions with the HKMA does not constitute regulatory approval. They reiterated that the licensing process is rigorous, and only a limited number of applicants will be approved in the initial phase. The SFC also confirmed that it would intensify surveillance of market activity and take decisive action against any manipulative or deceptive conduct.
In a further move to safeguard the market, the SFC introduced new cryptocurrency custody standards. These measures include a ban on the use of smart contracts in cold-wallet storage—a policy shift that could conflict with existing operational models used by several digital asset firms.
Under the Stablecoin Ordinance, the offering or promotion of unlicensed, fiat-referenced stablecoins to retail investors is now a criminal offense. The ordinance also provides for a six-month transition period and the creation of a public licensing registry.
