Key Takeaways
- Hong Kong’s new Stablecoin Law regulates only HKD-pegged or locally issued stablecoins.
- Popular stablecoins like USDT and USDC remain outside its scope.
- OTC trading stays legal, but regulation and retailv rights remain unclear.
Hong Kong’s Stablecoin Law: Limited Scope Raises Questions
Hong Kong’s newly enacted Stablecoin Law has stirred discussions amongst the crypto industry, with legal professionals remarking that it is of limited concern only to the area. As stated by attorney Gilbert Ng, the legislation is only applicable to stablecoins that are locally issued or pegged to the Hong Kong dollar (HKD). As a result, the most popular stablecoins like Tether (USDT) and USD Coin (USDC) are not directly regulated8 by this law.
Though this idea represents Hong Kong’s guarded take on digital asset regulation, it still creates room for international stablecoins that hold the largest volumes of global trade to fill those voids. At present, dealers are still allowed to perform transactions with USDT and USDC in Hong Kong without breaking the law since the latter does not affect foreign-pegged stable assets.
OTC Trading and Retail Uncertainty in Hong Kong
Another important point that Ng made is regarding over-the-counter (OTC) trading, which is still permitted under the new framework. Nevertheless, there is a gradual shift in the regulatory expectations towards closed-loop systems, where transactions can be carried out in controlled environments with stronger surveillance.
It is noted that while the legislation does not require Know Your Customer (KYC) checks, regulators are believed to prefer models that support strict user identification to lower the possibility of risk. This could mean that there will be many compliance measures for OTC platforms in the future to meet regulatory requirements.
In the meantime, the issue of retail trading rights is still uncertain. Regulators have not yet made up their minds whether they are going to grant ordinary investors more access to the stablecoin market or restrict them as they do with other digital assets.
Summary
Hong Kong’s Stablecoin Law is an important step in shaping digital asset regulation, but its limited focus on HKD-pegged coins leaves major global players like USDT and USDC unaffected. With OTC trading still allowed but under potential future restrictions, uncertainty continues around retail participation. While the law highlights Hong Kong’s intent to lead in financial innovation, its incomplete scope raises questions about long-term effectiveness.
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