Thomas Daniels
In a significant move to strengthen regulatory oversight in digital finance, Hong Kong will begin enforcing its Stablecoin Ordinance on August 1, making it a criminal offense to offer or advertise unlicensed fiat-referenced stablecoins (FRS) to retail investors. Violations will carry penalties of up to HK$50,000 (approximately $6,300) and a maximum prison sentence of six months.
The new regulation, introduced by the Hong Kong Monetary Authority (HKMA), represents one of the most stringent legal frameworks for stablecoin activity globally. HKMA Chief Executive Eddie Yue emphasized that the rule aims to instill credibility in the emerging stablecoin market and protect retail investors from speculative excess and potential fraud.
HKMA Signals Crackdown on Market Hype
Yue pointed to a growing “market euphoria” surrounding stablecoin-related announcements, which has triggered speculative spikes in stock prices and trading volumes. “It seems necessary to further rein in the euphoria,” he noted, referencing cases like Guotai Junan, whose shares surged 300% in June after its banking license was expanded to cover digital assets.
According to Bloomberg, around 50 companies have already applied for stablecoin licenses. However, Yue disclosed that many proposals lacked concrete implementation strategies and adequate risk management frameworks. “They also fail to put together viable and concrete plans as well as implementation roadmaps, let alone demonstrate their awareness of risks and competence in managing them,” he said.
Yue added that while some applicants show promise, most are unprepared for the regulatory requirements. As a result, the HKMA will approve only a limited number of licenses in the initial phase.
Global Regulatory Trends in Crypto Advertising
Hong Kong’s legislative approach aligns with broader international efforts to control crypto promotions. The European Union’s Markets in Crypto-Assets Regulation (MiCA) prohibits unauthorized promotion of digital assets and imposes financial penalties of at least €5 million or 3% to 12.5% of a company’s annual turnover. However, unlike Hong Kong, MiCA does not include prison terms.
In contrast, the UK’s Financial Conduct Authority (FCA) has faced enforcement challenges. As of early 2024, only about 50% of flagged illegal crypto advertisements were removed.
Hong Kong’s implementation of criminal penalties distinguishes it as a leader in digital asset regulation, signaling a clear intention to prioritize investor protection while cautiously advancing fintech innovation.
