SFC urges investors to stay cautious as firms rush to apply for stablecoin licenses
Hong Kong’s Securities and Futures Commission (SFC) has warned that the city’s new stablecoin regulatory framework may be fueling fraud risks, urging investors to remain vigilant amid speculative hype. The comments come just weeks after the Stablecoin Ordinance came into effect on August 1, introducing stricter rules for issuers.
Fraud Concerns Following Market Hype
According to Chinese financial outlet Zhitongcaijing, Ye Zhiheng, executive director of the SFC’s intermediaries division, said that fraud risks have risen since the new rules were introduced. He cautioned investors against making irrational decisions based on market rumors or sudden price movements.
Ye highlighted that some firms saw their stock prices soar simply after announcing plans to apply for a stablecoin license, even as other stablecoin companies reported double-digit losses on August 1 following the stricter-than-expected requirements.
Last week, the SFC and the Hong Kong Monetary Authority (HKMA) issued a joint statement flagging “abrupt market movements linked to the stablecoin concept.” The regulators said such fluctuations often stemmed from corporate announcements, social media posts, or news reports rather than fundamental developments.
The SFC added that it will closely monitor trading activity and take action against any manipulative or deceptive practices that threaten market integrity.
Stablecoin Ordinance and Compliance Rules
The new Stablecoin Ordinance introduced a six-month transition period for compliance and made it illegal to offer or promote unlicensed fiat-referenced stablecoins to retail investors. Regulators also launched a public license registry for issuers, aiming to provide transparency for both companies and investors.
In parallel, the SFC recently issued new cryptocurrency custody standards, banning the use of smart contracts in cold wallets and setting higher security requirements. The move could force several firms to adjust their existing operational practices.
As Hong Kong pushes to position itself as a global digital asset hub, regulators are balancing innovation with investor protection. With stricter rules now in place, authorities are signaling zero tolerance for hype-driven speculation and fraud in the city’s evolving stablecoin sector.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.