Hong Kong regulators warn against hype-driven stablecoin market swings

Hong Kong’s financial regulators cautioned investors to avoid making impulsive bets on stablecoin-linked assets after a spate of sharp price swings tied to speculation, corporate announcements, and unverified claims about licensing plans in the city.

In a joint statement, the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) said they had observed abrupt movements in share prices of companies linked to the stablecoin concept.

These shifts often followed news reports, social media posts, or statements suggesting that firms planned to apply for a stablecoin issuer licence, engage in related activities, or explore such initiatives locally. Some claims referenced discussions with the regulators themselves.

High bar for stablecoin licensing

Hong Kong introduced its stablecoin licensing regime earlier this year as part of a broader push to establish the city as a regulated hub for digital assets.

The HKMA said it applies a “rigorous and prudent” approach to reviewing applications, with stringent approval criteria and an expectation that only a small number will be granted in the initial phase.

HKMA Chief Executive Eddie Yue said dozens of parties have engaged with the regulator about licensing, but stressed that early communication and simply filing an application are not indicators of likely approval.

The process includes meeting capital, governance, risk management, and operational requirements designed to ensure the safety and stability of licensed stablecoins.

Investors cautioned

The SFC urged investors to remain clear-headed, conduct thorough research, and avoid decisions based solely on short-term price momentum or unsubstantiated online claims. It warned that volatility driven by hype could expose retail traders to significant losses.

SFC Chief Executive Julia Leung said the regulator will continue to monitor trading closely through its dedicated market surveillance team, which uses advanced systems to detect and investigate potential manipulation. She added that the agency intends to take strict enforcement action against any deceptive or misleading conduct.

The regulators also reminded companies and market participants to avoid making public statements that could mislead investors or create unrealistic expectations, noting that maintaining transparency and accuracy is critical to safeguarding market integrity during the rollout of Hong Kong’s stablecoin framework.

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