What Happened?
The Hong Kong Monetary Authority (HKMA) has finalized comprehensive regulatory rules for stablecoins, which will take effect on August 1. The Hong Kong authorities are adopting a very cautious “gatekeeper” strategy, emphasizing that no licenses have been issued at present and warning that most applicants do not meet the standards. Initially, only a limited number of licenses will be issued to ensure market order and investor protection.
In contrast to Hong Kong’s caution, the Bank of Korea (BOK) has shown a more proactive stance by establishing a new “Virtual Asset Department” to lead discussions and regulation regarding the Korean won stablecoin. This move is driven by political factors (to prevent capital outflow) and private sector initiatives, indicating that South Korea is exploring the development potential of stablecoins from a national strategic perspective.
Hong Kong and South Korea represent two different regulatory approaches. Hong Kong prioritizes “risk control” and “market stability,” establishing a high-threshold framework first. South Korea, on the other hand, focuses more on “national interests” and “industry development,” with the central bank taking the lead in exploration and promotion. These two different methods will shape the future landscape of digital asset development in Asia.
Hong Kong: Cautious Licensing, Framework First
As global attention on crypto assets continues to rise, the two major financial centers in Asia—Hong Kong and South Korea—are actively advancing their regulation and development of stablecoins with different paces and strategies. The HKMA has officially finalized a strict regulatory framework to establish an orderly market, while the BOK has set up a dedicated department, demonstrating its proactive exploration of the domestic stablecoin market.
Recently, the HKMA officially announced the regulatory framework for stablecoin issuers, including the “Guidelines for the Regulation of Stablecoin Issuers” and the “Guidelines for Anti-Money Laundering and Counter-Terrorist Financing,” which will take effect on August 1, bringing a clear regulatory order to the local crypto ecosystem.
According to the new regulations, the HKMA will establish a public registry of licensed stablecoin issuers for public access. However, the HKMA has emphasized that, to date, no licenses have been issued. The Hong Kong authorities have sternly warned the public to be cautious of any entities claiming to have obtained or are applying for licenses, noting that holding unlicensed stablecoins will be at the investor’s own risk.
HKMA Chief Executive Eddie Yue acknowledged that the speculation surrounding stablecoins in the market has led to unreasonable trading volumes and skyrocketing stock prices, making it necessary to “cool down this frenzy.” He revealed that many license applicants’ proposals are vague, lacking feasible implementation plans and necessary technical expertise, far from meeting the regulatory standards. Therefore, it is expected that only a limited number of licenses will be issued in the early stages of the new framework’s implementation.
The HKMA has encouraged market participants interested in applying to contact it before the regulations take effect on August 1 and must submit complete applications by September 30 to be included in the first batch of license reviews.
South Korea: Proactive Exploration, Central Bank Leading
Compared to Hong Kong, South Korea has demonstrated a more proactive stance. According to foreign media reports, the Bank of Korea (BOK) has established a “Virtual Asset Department” under its Financial Payment Systems Bureau. This department will be responsible for monitoring the cryptocurrency market and leading internal legislative and policy discussions regarding the Korean won (KRW) stablecoin.
Additionally, the BOK has officially renamed its previous “Digital Currency Research Team” to the “Digital Currency Team,” which is seen as a shift from theoretical research to more proactive digital currency practical initiatives.
The discussions on stablecoins in South Korea are partly influenced by the United States’ regulatory stance on dollar stablecoins. There are voices in South Korea’s political circles supporting the development of a stablecoin market based on the domestic currency, believing that this would help prevent capital outflow. Members of the ruling party have even submitted related bills. The private sector’s response has also been quite swift, with several major banks and payment service providers in South Korea applying for trademarks for their stablecoin products.
A noteworthy development is that, due to the strong momentum of private stablecoin development, the BOK has decided to temporarily shelve its Central Bank Digital Currency (CBDC) project.
BOK Governor Lee Chang-yong previously stated that he sees a demand for a Korean won stablecoin in the market but also warned that allowing non-bank institutions to issue stablecoins could lead to market chaos, reflecting the cautious considerations of South Korean regulators while actively exploring.
Hong Kong is ensuring market stability and investor protection through the establishment of a strict entry system, playing the role of a “gatekeeper.” Meanwhile, South Korea is more actively exploring the potential of the domestic stablecoin market under the guidance of the government and the central bank to address national economic strategic needs. The different regulatory paths in these two regions will undoubtedly provide important indicators for the future development of digital assets in Asia and even globally.
References: theblock, cointelegraph