Hong Kong stablecoin regime a ‘double-edged sword' for market's growth, analysts say
Hong Kong's new stablecoin law sets a global standard but might initially sideline innovative start-ups while encouraging big local and mainland financial firms to participate in the cryptocurrency sector's growth, industry experts said. The city rolled out one of the most stringent stablecoin regimes globally and kick-started the application process for potential issuers on Friday, part of a broader effort to be a leading digital asset hub connected to China's vast economy. The move aims to ensure a prudent approach for the issuance of stablecoins , a type of cryptocurrency backed by fiat currencies or other reserve assets. The regime's upfront capital requirement of HK$25 million (US$3.2 million) presented a barrier for smaller firms, according to Florian Spiegl, founder and CEO of Evident Group, which operates a digital investment platform for alternative assets and is licensed by the Securities and Futures Commission . In addition, a requirement that every applicant be a locally incorporated company with management on the ground added cost and friction for global players, he said.
A limited number of issuers would initially emerge in Hong Kong, analysts said. These would primarily be major local and mainland Chinese firms, as some smaller start-ups and fintech innovators would be deterred, they said.
'For applicants, it's a double-edged sword, as the costs of entry and operations are too high for some,' Spiegl said. 'For major banks and large, well-capitalised global crypto firms that want a 'gold standard' licence to minimise risk and signal trust, Hong Kong's tough stance might actually be a draw.'
Hong Kong's strict rules contrast with Singapore's base capital requirement of at least S$1 million (US$776,367) and the rules in the US, which just require that the amount be sufficient to ensure ongoing operations.
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