In a recent online investment committee meeting on Oct. 6, Christian Hui, Hong Kong’s Secretary for Financial Services and the Treasury, emphasized that retail investors in Hong Kong are currently prohibited from trading stablecoins according to local report. This restriction is in place until official regulations are established, a development expected to unfold by the close of 2024.
Lack of Regulation for Stablecoins
Hui pointed out that the absence of regulations for stablecoins such as Tether or USD Coin is the key factor behind this restriction. These unregulated conditions necessitate a cautious approach, especially given the widespread use of stablecoins like USDT in the cryptocurrency market.
Highlighting the risks involved, Hui discussed the volatility issues experienced by certain stablecoins, some of which have even collapsed in the past. He underscored the critical role of reserve management in influencing the stability of stablecoin values and, subsequently, the rights of investors to redeem fiat currencies.
JPEX Fraud Case Raises Concerns
During the meeting, Hui also addressed the serious fraud case involving the local crypto exchange JPEX. The exchange, which had allegedly operated without a license and faced accusations of promoting its services improperly, became embroiled in a scandal. Hui emphasized the need for heightened supervision in the cryptocurrency market, citing the JPEX case as a pertinent example.
Regulatory Guidelines in the Pipeline
Despite the challenges, Hong Kong regulators are taking steps to establish a framework. In early August 2023, retail investors gained the ability to trade cryptocurrencies like Bitcoin. However, stablecoins remain off-limits until the Hong Kong Monetary Authority introduces regulatory guideline. This expected to be in place by the close of 2024.
This move further aims to ensure a secure and regulated environment for the trading of stablecoins. Also, it’ll help in safeguarding investors from potential risks and fraud.