March 28, 2024
Retail stablecoin trading remains off-limits in Hong Kong
Latest Cryptocurrency News

Hong Kong’s Stand on Stablecoins: Retail Trading Prohibited Until Regulatory Framework in Place

As Hong Kong continues to embrace cryptocurrency trading for individual investors, a local official emphasized that retail stablecoin trading remains prohibited.

Hong Kong has yet to establish regulations pertaining to stablecoins such as Tether or USD Coin. Consequently, retail investors are barred from engaging in transactions involving these assets, as clarified by Hong Kong’s Secretary for Financial Services and the Treasury, Christian Hui. Hui shared his insights on cryptocurrency regulation in Hong Kong during an online investment committee meeting on October 6, as reported by the local news agency Ming Pao.

Cryptocurrency service providers have widely integrated stablecoins like USDT into their trading offerings due to their intrinsic stability, linked to the value of the United States dollar or assets like gold, according to Hui. However, he also acknowledged that some stablecoins have encountered significant volatility issues or even experienced collapses in the past. Hui pointed out that the management of reserves backing stablecoins has a substantial impact on the stability of prices and investors’ ability to redeem fiat currencies.

In light of these risks, Hui reportedly stated that retail trading of stablecoins will remain prohibited until Hong Kong establishes official regulations governing these digital assets.

Additionally, Hui noted that the recently shuttered local cryptocurrency exchange, JPEX, had allegedly been promoting its services in the region without the necessary license and had become embroiled in a significant fraud case. This incident underscores the need for enhanced oversight within the cryptocurrency market. JPEX suspended certain services on its platform in mid-September 2023, citing a liquidity crisis triggered by what it deemed “unfair treatment” from specific institutions in Hong Kong. The JPEX scandal garnered significant attention in the industry, prompting Hong Kong authorities to launch an investigation after receiving over 2,000 complaints from JPEX users who reported approximately $180 million in losses.

The JPEX case unfolded a few weeks after Hong Kong regulators officially permitted retail investors to trade cryptocurrencies like Bitcoin in early August 2023. The Hong Kong Monetary Authority is anticipated to introduce regulatory guidelines for the stablecoin market by the conclusion of 2024.

Image by pixabay

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