New Law Targets Unregulated Stablecoin Activity

Hong Kong will be officially enforcing its new rule that makes it a criminal offense to offer or promote unlicensed stablecoins to retail investors beginning August 1.

The new rules introduce criminal penalties of a fine of up to 50,000 Hong Kong dollars and a maximum prison sentence of six months, marking one of the strictest crypto laws to date.

The enforcement comes as part of Hong Kong’s upcoming Stablecoin Ordinance, which aims to regulate fiat-referenced stablecoins (FRS) and introduce stronger investor protections in the crypto space.

The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, issued a public notice on Wednesday warning retail investors to avoid engaging with stablecoin offerings that lack official licensing.

HKMA Chief Executive Eddie Yue emphasized that the regulation is designed to promote stability and credibility within the stablecoin ecosystem while protecting investors from fraudulent schemes and excessive market speculation.

Putting A Cap Over The Hype Around Stablecoins

Yue highlighted that the hype surrounding the stablecoin landscape in Hong Kong has led to some disruptions, including unjustified surges in stock prices and volumes.

One such case involved Guotai Junan, whose stock price soared by 300% in June following an announcement that its banking license had been expanded to cover digital assets.

Yue stated that the overhype is also partially caused by media coverage that tends to over exaggerate the current situation.

For example, Bloomberg recently reported that nearly 50 companies have already applied for stablecoin licenses. However, Yue noted that many of these institutions submitted vague proposals that lacked conceptual and realistic implementation plans.

As a result, only a few handful of these companies will be granted the license, while most applicants should not expect approvals.

However, Yue also stated that there is a need for regulatory guardrails to cool down the speculative frenzy.

Hong Kong’s strict stance aligns with efforts in other regions to regulate crypto promotions.

For instance, the European Union’s Markets in Crypto-Assets Regulation (MiCA) prohibits unlicensed entities from advertising crypto products and imposes significant financial penalties—ranging from €5 million to 12.5% of a company’s annual revenue. However, it does not include criminal charges.

In contrast, enforcement has been less effective in the United Kingdom, where the Financial Conduct Authority (FCA) has struggled to curb illegal crypto advertising. As of January, only half of the flagged violations had been addressed.