Hong Kong Delays Stablecoin Trading for Retail Investors

As Hong Kong continues to implement cryptocurrency trading for individual investors, a local official emphasized that stablecoin trading is not yet permitted for retail investors.

According to Christian Hui, Hong Kong’s Secretary for Financial Services and the Treasury, Hong Kong has not adopted regulations for stablecoins such as Tether or USD Coin, meaning retail investors are not permitted to trade these assets.

Ming Pao reported that the official discussed cryptocurrency regulation in Hong Kong during an online investment committee meeting on October 6.

Hui stated that cryptocurrency service providers have widely adopted stablecoins, such as USDT, as a significant trading asset due to their value-stabilizing peg to the United States dollar or other assets, such as gold.

In the past, however, several stablecoins have experienced significant volatility or even collapsed, the secretary noted, adding that reserve management of stablecoins has a substantial impact on the price stability of investors’ rights to redeem fiat currencies.

Hui reportedly stated that retail trading of stablecoins will not be permitted until Hong Kong officially regulates stablecoins.

Hui also mentioned that the defunct local cryptocurrency exchange JPEX, which was allegedly promoting its services in the region without a license, was involved in a severe fraud case, highlighting the need for a higher level of market oversight.

As of mid-September 2023, JPEX suspended some services on its platform, blaming a liquidity crisis on “unfair treatment” from several Hong Kong institutions.

JPEX rapidly became the center of a major scandal in the industry, with Hong Kong authorities launching an investigation after receiving more than 2,000 complaints from JPEX users reporting nearly $180 million in losses.

The JPEX case occurred a few weeks after Hong Kong regulators authorized retail investors to trade cryptocurrencies such as Bitcoin at the beginning of August 2023.

By the end of 2024, the Hong Kong Monetary Authority is anticipated to have introduced regulatory guidelines for the stablecoin market.