Hong Kong Monetary Authority CEO Eddie Yue has delivered a sobering wake-up call to the territory’s overheated stablecoin market, cautioning against what he describes as a dangerous “bubble” atmosphere where companies are riding stock price surges simply by announcing vague intentions to enter the digital currency space.
As Hong Kong’s groundbreaking Stablecoin Ordinance takes effect on August 1, Yue’s pointed warnings reveal a growing concern that speculation and hype are overshadowing genuine innovation in one of Asia’s most important financial centers.
Company Application Concerns
The timing of Yue’s intervention is critical. With dozens of institutions reaching out to Hong Kong Monetary Authority staff expressing interest in stablecoin licenses, the central banker has observed a troubling pattern: most applicants remain stuck in the “conceptual stage,” offering grand visions about enhancing cross-border payments and supporting Web3 development but lacking concrete implementation strategies or risk management capabilities.
“Many remain at the conceptual stage, such as proposing visions to enhance cross-border payment efficiency, support Web3.0 development, and improve foreign exchange market efficiency, but lack concrete application scenarios,” Yue noted in his recent blog post.
The regulatory response has been deliberately measured and restrictive. Yue has made clear that only a select few licenses will be approved during the initial implementation phase, virtually guaranteeing that many current applicants will face disappointment.
Market Manipulation Issues
The HKMA’s concerns extend beyond mere unpreparedness to what appears to be systematic market manipulation. Yue has identified a disturbing trend where listed companies whose core businesses have no connection to stablecoins or cryptocurrency have seen dramatic stock price increases and trading volume spikes simply by announcing exploratory intentions in the space.
This scarcity-by-design approach reflects the HKMA’s determination to prioritize quality over quantity, ensuring that only genuinely prepared institutions with robust technical capabilities and comprehensive risk management systems receive authorization.
Even successful license holders shouldn’t expect immediate profits, Yue warned. The emphasis on “steady development” and substantial initial resource investments means uncertainty regarding short-term financial contributions to company bottom lines. This reality check directly contradicts the get-rich-quick mentality driving much of the current market enthusiasm.
The regulatory framework taking shape is comprehensive and demanding. Updated licensing guidelines expected by month-end will include significantly stricter Anti-Money Laundering requirements, reflecting the HKMA’s commitment to minimizing financial crime risks while fostering orderly market development.
Companies like logistics technology firm Reitar Logtech and Ant Group’s overseas arm have already submitted applications, representing the caliber of established institutions the HKMA appears to favor. However, the regulator’s phased approach suggests that even approved stablecoins will initially focus on practical use cases integrated with the real economy rather than speculative instruments.
As Hong Kong positions itself as a global digital finance hub, Yue’s cautionary stance reflects sophisticated regulatory thinking that prioritizes long-term credibility over short-term market excitement. His warning serves as a crucial reminder that sustainable innovation requires substance over speculation.