Hong Kong’s HKMA and SFC warned investors against speculative hype around stablecoin licensing

Hong Kong’s top financial regulators have warned investors to exercise restraint amid a flurry of speculation surrounding stablecoin licensing and the expansion of cryptocurrency exchange-traded funds (ETFs) in the city.

In a joint statement on Thursday, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) said they had observed “abrupt market movements” linked to the stablecoin sector in recent days.

The volatility, they said, appeared to follow “corporate announcements, news reports, social media posts or speculation” about applications to become licensed stablecoin issuers in Hong Kong.

The warning comes as two new spot cryptocurrency ETFs, the MicroBit Bitcoin spot ETF and MicroBit Ethereum spot ETF, prepare to list on the Hong Kong Stock Exchange on August 21, further boosting the city’s growing roster of regulated digital asset products.

Regulators push back on market hype

The HKMA, which is in charge of the city’s stablecoin licensing framework, stressed that applying for a license or engaging with the authority was “just part of the licensing process” and should not be interpreted as an endorsement or guarantee of approval.

“The approval thresholds set are high, and only a handful of licences will be granted initially,” said Eddie Yue, HKMA chief executive. “We have been in preliminary communication with dozens of parties regarding stablecoin licensing… [but] such communication is not an indicator of approval or endorsement of any entity’s prospects.”

The SFC, which oversees Hong Kong’s securities markets, warned of “misleading prospects of gains from short-term price volatility” and the dangers of unsubstantiated claims, particularly on social media. Julia Leung, the SFC’s chief executive, added that her agency “will not hesitate in taking forceful and decisive actions to maintain market integrity and protect investors from undue risks.”

Crypto ETFs gain momentum in Hong Kong

The cautionary statement came just a day after local media reported that MicroBit’s two spot ETFs, one tracking Bitcoin, the other Ether, had received approval for listing next week. Each will carry a 0.5% annual management fee, with BOC International Prudential Trustee serving as custodian and administrative manager, and HashKey Exchange as the virtual asset trading platform.

Once listed, they will join an expanding suite of crypto ETFs in the city. Since the launch of the Pandu spot Bitcoin ETF last month, Hong Kong has positioned itself as Asia’s leading regulated hub for cryptocurrency ETFs. With the addition of MicroBit’s funds, there will be nine spot crypto ETFs listed on the Hong Kong Stock Exchange.

The city’s ambition to become a crypto gateway is being closely watched by international asset managers and digital asset firms, particularly as mainland China maintains its ban on most crypto-related activity.

Hong Kong’s licensing regimes for both virtual asset trading platforms and stablecoin issuers are viewed as part of a broader effort to attract global crypto capital while keeping investor protection and market integrity at the forefront.

Hong Kong tries to balance innovation and investor protection

While the ETF announcements have been welcomed by the crypto industry as a sign of Hong Kong’s progressive stance, the joint statement from the HKMA and SFC speaks to the delicate balance the city is attempting to strike between creating an environment for sustainable innovation and preventing speculative excess.

Market observers say the recent run-up in share prices of companies linked to stablecoin initiatives highlights the risks regulators are trying to contain. Some stocks have surged on little more than unverified claims of plans to apply for a licence, only to fall sharply when expectations failed to materialize.

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