Hong Kong Official: Hong Kong still prohibits retail trading of stablecoins, exchanges are not allowed to offer yield-generating products

Hong Kong regulatory officials raised several points in an interview, stating that even licensed platforms are not allowed to offer stablecoin trading to retail investors. Currently, retail investors can only trade BTC and ETH, while other cryptocurrencies require application and cannot provide yield products.

JPEX Case Reflects Regulatory Necessity

According to Hong Kong Ming Pao, Financial Secretary and Treasury Secretary Christopher Hui pointed out that the serious fraud involved in JPEX has reflected the necessity of regulation. He used FTX as a comparison to Hong Kong's JPEX:

Investing in unregulated platforms carries high risks, as these platforms lack transparency and the stability of their operations is questionable. Investors may have no recourse for disputes with the platform, and if the platform closes, ceases operation, or worse, is hacked, investors are likely to lose all the assets held on the platform.

Hong Kong Still Prohibits Retail Trading of Stablecoins

Christopher Hui pointed out that although many trading platforms use stablecoins such as USDT as a medium of exchange, there have been instances in the past where stablecoins experienced price fluctuations, and even cases of collapse. Furthermore, the "reserve management" of stablecoin issuers can also affect the coin's price and users' redemption rights.

Given the uncertainties mentioned above, Christopher Hui emphasized that retail trading of stablecoins will not be allowed in Hong Kong until stablecoins are formally regulated.

This issue was also included in Hong Kong's disclosed regulatory framework:

Hong Kong Crypto Regulation Effective June 1: Exchanges Have Heavy Responsibility to Protect Retail Investors, Temporarily Prohibited from Buying and Selling Stablecoins

Licensed Platforms Prohibited from Offering Collateralized and Yield Products

As for the yield products commonly seen on offshore exchanges, including products that provide users with additional interest through similar collateralized deposits, the SFC executive Huang Lok Yan stated that platforms need to demonstrate more neutrality and, to prevent conflicts of interest, licensed platforms are currently not allowed to offer such services.

Huang Lok Yan also mentioned that licensed platforms are currently only allowed to facilitate retail trading of BTC and ETH, and any addition of new currencies requires an application to the SFC for approval before trading is allowed.