Hong Kong warns of rising fraud risks amid new stablecoin regulations
A top official from the Hong Kong Securities and Futures Commission (SFC) has warned that the introduction of the city’s new stablecoin regulatory framework may open the door to increased fraud.
Speaking to local media on August 18, Ye Zhiheng, executive director of the SFC’s intermediaries division, said the recent market volatility linked to stablecoins has made retail investors more susceptible to scams, reports Cointelegraph.
His remarks come just weeks after the new law took effect on August 1, mandating that only licensed entities can offer or promote fiat-referenced stablecoins to the public.
Market hype drives risky behavior, say regulators
According to Ye, some companies have seen their share prices rise merely by announcing plans to apply for a stablecoin license, regardless of whether they meet regulatory standards. This behavior, he said, has been exacerbated by social media speculation, corporate press releases, and retail hype.
In a joint statement, the SFC and the Hong Kong Monetary Authority (HKMA) warned that they are closely monitoring suspicious trading activity and will crack down on manipulative behavior. The statement highlighted “abrupt market movements” linked to stablecoin-related announcements, and reiterated the need for investors to avoid being driven by “market sentiment or price momentum.”
Hong Kong tightens crypto oversight to safeguard retail market
The recent implementation of Hong Kong’s Stablecoin Ordinance includes a six-month transition period for companies to become compliant. The legislation criminalizes the offering of unlicensed stablecoins to retail investors and introduces a public license registry to enhance transparency. The SFC has also issued immediate guidance on custody practices, including a controversial ban on smart contracts in cold wallets, a move that could disrupt operations at several crypto firms.
Despite the SFC’s strong pro-innovation stance in past years, officials now appear laser-focused on preventing speculative excess and protecting retail users from the growing risks associated with digital assets.
Recently we wrote that Thailand is preparing to launch TouristDigiPay, a nationwide regulatory sandbox that enables foreign visitors to exchange cryptocurrency for Thai baht and make digital payments through licensed e-money providers.
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