As Hong Kong progresses with the adoption of cryptocurrency trading for individual investors, a local official stressed that retail stablecoin trading is not yet allowed.
The official provided remarks on cryptocurrency regulation in Hong Kong during an online investment committee meeting on Oct. 6, the local news agency Ming Pao reported.
Cryptocurrency service providers have been broadly using stablecoins like USDT as a major trading asset because their value is designed to be stabilized by the peg to United States dollars or assets like gold, Hui said. However, some stablecoins have faced serious volatility issues or even collapsed in the past, the secretary noted, adding that reserve management of stablecoins highly affects the price stability of investors’ rights to redeem fiat currencies.
Considering these risks, retail trading of stablecoins will not be allowed until Hong Kong officially regulates stablecoins, Hui reportedly declared.
Hui also mentioned that the shuttered local crypto exchange JPEX — which was allegedly promoting its services in the region without a license — was involved in a serious fraud case, reflecting the need for higher supervision of the cryptocurrency market.
Cointelegraph has reached out to Hong Kong’s Securities and Futures Commission to ask about stablecoin trading rules in the country. This article will be updated pending new information from the regulator.
Related: Hong Kong police recover $11M worth of assets in JPEX case: Report
JPEX halted certain services on its platform as of mid-September 2023, citing a liquidity crisis triggered by “unfair treatment” from certain institutions in Hong Kong. JPEX quickly became the center of a major scandal in the industry, with Hong Kong authorities launching an investigation after receiving more than 2,000 complaints from JPEX users reporting nearly $180 million in losses.
The JPEX case came a few weeks after Hong Kong regulators officially allowed retail investors to trade cryptocurrencies like Bitcoin (BTC) in early August 2023. The Hong Kong Monetary Authority is expected to introduce regulatory guidelines for the stablecoin market by the end of 2024.
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