Regulation is

Source: Titanium Media APP

"What deserves more of our attention is the trend of bubble formation. Recently, with the hype around stablecoin concepts, the market has shown excessive enthusiasm. Some listed companies, as long as they declare their intention to develop stablecoin businesses, can 'turn stones into gold', and their stock prices rise accordingly."

"To date, dozens of institutions have taken the initiative to contact the Hong Kong Monetary Authority (HKMA) team. Some have clearly stated their intention to apply for stablecoin licenses, while others are in the preliminary exploration stage."

As Hong Kong's "Stablecoin Ordinance" is set to take effect on August 1, 2025, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, wrote another article warning against the "excessive speculation" in the stablecoin market, emphasizing the need to "cool down" this upsurge. Eddie Yue's second article in less than a month to cool down the hype around stablecoins fully demonstrates the regulatory authorities' vigilance against the current market sentiment.

Dozens of institutions flock in, most "only at the conceptual stage"

Although the HKMA has clearly stated earlier that only "a few" stablecoin licenses will be issued in the initial stage, Eddie Yue revealed that dozens of institutions have taken the initiative to contact the HKMA team so far. Eddie Yue said that among these institutions, some have clearly expressed their intention to apply for stablecoin licenses, while others are in the preliminary exploration stage.

Eddie Yue bluntly stated that among these contacted institutions, many of their plans "only stay at the conceptual stage". They put forward grand visions, such as "improving cross-border payment efficiency", "supporting the development of Web3.0", and "enhancing foreign exchange market efficiency", but generally lack actual application scenarios, practical and feasible specific plans and implementation plans, let alone the awareness and ability to control risks.

For those institutions that claim to be able to provide application scenarios, Eddie Yue also pointed out that they themselves often lack the technology to issue stablecoins and the experience and ability to control various financial risks. The contradiction here is that enterprises with application scenarios may not have the technical and risk management background as financial institutions to issue and manage currencies; while institutions with financial experience may lack an in-depth understanding of the application scenarios of stablecoins.

In response, Eddie Yue suggested that for such institutions with application scenarios, a more practical approach is to cooperate with other institutions that have the technology to issue stablecoins and risk management capabilities to jointly provide application scenarios, rather than blindly pursuing to become issuers. This "strong-strong cooperation" model can give full play to the advantages of all parties, reduce potential risks, and is a feasible path for the steady development of the stablecoin market.

"There are quite a few disappointed people." Eddie Yue said that even if a license is obtained, considering the hope for steady development and the initial resource investment required, the contribution to the company's short-term profits will have certain uncertainties. It is hoped that investors will remain calm and think independently when digesting positive market news.

Eddie Yue mentioned that the current stablecoin market has shown a "bubble trend", which also coincides with the "touchstone into gold" effect in the current Hong Kong stock market. Some listed companies, regardless of whether their main business is related to stablecoins or digital assets, as long as they declare their intention to develop stablecoin businesses, their stock prices will rise accordingly, trading volume will increase significantly, and the company's popularity will be greatly enhanced. This kind of stock price performance based on concept speculation rather than actual business progress undoubtedly exacerbates the risk of market bubble.

Some stablecoin concept stocks have indeed seen a surge recently. For example, Jinyong Investment, which announced that it will strategically explore the application scenarios of offshore RMB stablecoins with partners, soared 5.3 times on a single day on July 8. Guotai Junan International, which was approved for a Hong Kong virtual asset trading license, saw its stock price soar nearly twice on June 25, rising from HK$1.2 on June 24 to more than HK$7 at one point.

In addition, stocks that have risen sharply include Puxing Energy (the company subscribed for Series A preferred shares issued by HashKey Holdings), Deling Holdings (the company claimed that the RWA tokenization project in cooperation with fintech company Asseto has made substantial progress and is expected to become the first licensed brokerage in Hong Kong to independently implement commercial property tokenization), Everbright Holdings (which strategically invested in the US-listed stablecoin giant Circle in the early years), Lianlian Digital (announced that it will apply for stablecoin issuance business), and so on.

Fraudulent activities have emerged, be alert to fraud traps

In addition to the "bubble trend" in the market, more seriously, Eddie Yue further disclosed that the Hong Kong Monetary Authority has noticed that "fraudulent activities by promoting digital assets and stablecoins have recently occurred, causing losses to the public".

For example, on July 16, the Hong Kong police revealed that on July 15, 4 local Hong Kong residents were arrested on charges of "conspiracy to defraud". They were suspected of holding promotional dinners for mainland virtual currency scams, soliciting victims and collecting 3.89 million Hong Kong dollars in fraudulent funds. Except for a small amount of funds being withdrawn, the remaining about 3.2 million Hong Kong dollars have not been recovered yet.

Eddie Yue emphasized that the "Stablecoin Ordinance" will take effect on August 1. According to the ordinance, it will be illegal to promote any unlicensed stablecoins to the Hong Kong public from the effective date. It is hoped that the public will be more vigilant to avoid falling into the legal net; during this period, if someone promotes unlicensed stablecoins to you, you must also remain vigilant.

Eddie Yue mentioned that more stringent requirements will be established in anti-money laundering to minimize the risk of stablecoins being used as a tool for money laundering, and strive to allow the Hong Kong stablecoin market to develop in an orderly and healthy manner.

In the mainland, a wealth management platform called "DGCX Xinkangjia" recently ran away, causing widespread concern. The platform stole the name of the China branch of the Dubai Gold and Commodities Exchange (DGCX) to recruit investors, promised high returns, and settled with US dollar stablecoin (USDT), resulting in losses for a large number of investors. The use of virtual currency as a trading medium also makes it difficult to recover funds.

This has aroused the whole society's attention and vigilance against new online frauds. Regulators have frequently "blown the whistle". According to incomplete statistics, since July, financial regulatory authorities in many places including Guangdong, Yunnan, Hunan, Liaoning, Heilongjiang, Zhejiang, Fujian and other places have frequently warned of the risks of illegal fund-raising and new online fraud in the name of "virtual currency".

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