Hong Kong issues strictest stablecoin regulations

On August 1st, the highly anticipated Hong Kong Stablecoin Ordinance finally came into effect. Regulatory action on both sides of the Pacific is a stark contrast, and the divergence in the crypto landscape is accelerating from this moment. While the overall requirements of the ordinance remain unchanged from the June draft, the detailed implementation rules can only be described as stringent. On July 29, the eve of the Ordinance's formal entry into force, the Hong Kong Monetary Authority (HKMA) released a series of supporting regulatory documents for the new Ordinance, including the consultation summary and the "Guidelines on the Supervision of Licensed Stablecoin Issuers"; the consultation summary and the "Guidelines on Combating Money Laundering and Counter-Terrorist Financing (Licensed Stablecoin Issuers)"; the "Summary Notes on the Licensing Regime for Stablecoin Issuers" related to the licensing system and application procedures; and the "Summary Notes on Transitional Provisions for Existing Stablecoin Issuers." In short, to meet anti-money laundering risks, stablecoin issuers must not only verify user identities and retain real-name data for more than five years, but also must not provide services to anonymous users. In the initial stages, they will also have an obligation to verify the identity of every stablecoin holder. The HKMA also provided an explanation. Chen Jinghong, Executive Director (Regulations and Anti-Money Laundering), pointed out that, given that the industry's current ongoing monitoring tools have failed to convince the HKMA that they can effectively mitigate money laundering risks, and that international organizations such as the Bank for International Settlements have emphasized the importance of preventing money laundering using stablecoins, the HKMA will adopt a "risk-based but prudent" supervisory approach. However, from a scenario perspective, particularly in cross-border payments in physical settings, it is virtually impossible to verify the identity of anonymous holders of offshore accounts in real time, let alone cover every holder in a large-scale payment system. From a practical perspective, this move essentially excludes all applicants other than banking institutions. It's worth noting that under this regulation, Hong Kong stablecoins will essentially say goodbye to interacting with DeFi protocols. After all, existing interactive wallets are anonymous. Compared to publicly available USDT and USDC, Hong Kong stablecoins will be significantly less competitive. With such a strict implementation path, the Hong Kong Stablecoin Ordinance is undoubtedly known as the "strictest stablecoin regulation in the world." Interestingly, the last region to be recognized as having the strictest regulations was Singapore, Hong Kong's "twin star." In June of this year, the Monetary Authority of Singapore (MAS) released the final policy guidelines for Digital Token Service Providers (DTSPs). The strict regulations, including "no license, no pay," and "full industry chain jurisdiction," triggered a wave of Web3 withdrawals.

From the specific measures, the first is to abandon the traditional model of first jurisdiction and then law, and clarify the reclassification standards of crypto assets, for airdrops, ICOs, Staking The CSRC will develop a regulatory framework to implement this concept. For example, it will draft a regulatory framework to allow securities and non-securities crypto assets to coexist and trade on SEC-registered platforms, and relax the listing conditions for certain assets on unregistered exchanges (such as platforms with only state licenses). Fourth, it will provide institutional and service guarantees, introduce an "innovation exemption mechanism," and focus on commercial viability to allow emerging business models and services that do not fully comply with existing rules to be quickly brought to market. However, such service providers must comply with the commitment to regularly report to the SEC, introduce whitelist or certification pool functions, and only allow those that meet compliance functional standards (such as

It's not difficult to foresee that the crypto industry's "US-centric" structure will be further strengthened, and the US market will become a key battlefield for the development of crypto projects. Other regions may be destined to only differentiate themselves and move away from the path of subordination.