AsianFin -- As Hong Kong prepares to implement its landmark Stablecoin Ordinance on August 1, regulators are growing increasingly uneasy over the exuberance sweeping through financial markets.
With dozens of firms rushing to stake a claim in the city’s nascent stablecoin regime—many armed with little more than ideas—Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue is once again calling for a market cooldown.
In his second public warning in less than a month, Yue described signs of “froth” emerging in the stablecoin space, citing inflated valuations and speculative trading in so-called concept stocks. “The market is overheating,” Yue said. “What we are witnessing is enthusiasm decoupled from fundamentals.”
Since the HKMA began accepting inquiries related to stablecoin licensing, over 30 institutions have proactively contacted the regulator. While some have explicitly declared their intention to apply for a license, many remain in the early exploratory phase. According to Yue, a large portion of these firms lack realistic use cases, detailed implementation plans, or the technical and risk management capabilities required to issue a fiat-pegged digital currency.
“A number of players have nothing beyond slogans like ‘cross-border efficiency’ or ‘supporting Web3,’” Yue said. “But without actual infrastructure, technology, or compliance frameworks, these projects are nowhere near viable.”
Yue urged companies without stablecoin expertise to consider forming alliances with more experienced partners rather than trying to go it alone. “A strong partnership model may provide a more practical route for the sector’s healthy development,” he noted.
The speculative fervor has already begun roiling Hong Kong’s equity market. Several listed companies with tenuous links to the stablecoin ecosystem have seen their share prices skyrocket on little more than a press release.
Shares of Jinyong Investment surged more than 530% in a single day on July 8 after it announced a partnership to explore offshore RMB stablecoins. Guotai Junan International’s stock nearly doubled on June 25 after receiving a virtual asset trading license. Other notable gainers include Puxing Energy, Deli Holdings, China Everbright Ltd., and Lianlian Digital—all of which have issued statements touting their involvement in tokenization or stablecoin initiatives.
“These moves appear more sentiment-driven than substance-based,” Yue cautioned, adding that such speculative activity could expose retail investors to “concept risk”—investing in companies based on vague promises rather than operational reality.
The speculative boom has also created fertile ground for fraud. On July 15, Hong Kong police arrested four people accused of orchestrating a digital asset scam that netted nearly HK$3.9 million. The suspects allegedly lured victims with promises of high returns from a mainland virtual currency project and hosted promotional dinners to legitimize their scheme.
Elsewhere, a mainland platform called “DGCX Xinkangjia” recently absconded with investor funds after impersonating the Dubai Gold & Commodities Exchange’s China arm and settling transactions in USDT, highlighting the risks of anonymous, blockchain-based financing mechanisms.
In response, Yue reminded the public that under the new Stablecoin Ordinance, it will be illegal to market or promote unlicensed stablecoins to Hong Kong residents starting August 1. Violators could face criminal penalties. The HKMA also plans to tighten anti-money laundering rules, citing the risk of stablecoins being used as laundering tools.
While Hong Kong is positioning itself as a regulated gateway for digital finance, Yue stressed that “long-term credibility will not be built on hype.” The government plans to issue only a small number of stablecoin licenses in the first phase, with a strong emphasis on technical competence, compliance, and investor protection.
“There’s no shortage of disappointed investors,” Yue said. “Even if a license is secured, it does not guarantee profitability—especially in the early stages, when operational costs are high and revenue uncertain.”
Yue's remarks reflect a broader effort to balance innovation with stability, as Hong Kong seeks to establish itself as a trusted global hub for Web3 development. Whether the city can strike that balance amid soaring market expectations remains to be seen.
