The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have issued a joint statement in response to recent sharp market movements linked to the stablecoin sector.

The regulators noted that these movements appear to have been driven by corporate announcements, media reports, social media posts, or speculation regarding plans to apply for a stablecoin issuer license, participate in related activities, or explore such initiatives in Hong Kong.

Some of these claims have also referred to recent interactions with financial regulators in the city.

The HKMA reiterated that it takes a robust and prudent approach, applying a high threshold when assessing applications for a stablecoin issuer license.

The authority emphasised that an expression of interest, an application, or communication with interested parties forms only part of the licensing process.

A license will only be granted if all requirements are met.

Given the significant uncertainty surrounding the outcomes of preliminary plans or applications, the regulators cautioned that market movements driven by speculation highlight the need for vigilance.

Volatility in share prices can result in irrational investment decisions and expose investors to unnecessary risks.

The HKMA and the SFC advised the public to exercise caution, carry out thorough research, and avoid making decisions based solely on market sentiment or price trends.

Well-informed and considered decision-making is essential to mitigating risks during periods of heightened volatility.

Market participants were reminded to communicate responsibly and avoid making statements that could mislead investors or create unrealistic expectations.

To protect market integrity, the SFC stated that its dedicated market surveillance team will continue to monitor trading activities closely and take firm action against manipulative or deceptive practices.

Eddie Yue, Chief Executive of the HKMA, said:

“The HKMA adopts a rigorous and prudent approach in assessing applications for a stablecoin issuer license. The approval thresholds are high, and only a limited number of licenses will be granted initially. We have been in preliminary communication with dozens of parties regarding stablecoin licensing as part of our market engagement. Such communication, or any related indication of interest or application, does not imply approval or endorsement of an entity’s prospects.”

Julia Leung, Chief Executive Officer of the SFC, said:

“Recent share price movements associated with the stablecoin concept underscore the importance for investors to be clear-minded about the risks involved and the potential financial losses from making relevant investments. In addition to conducting thorough research, they should be wary of unsubstantiated claims, particularly those circulating on social media, and avoid being influenced by short-term price volatility.”

Featured image credit: Edited by Fintech News Hong Kong, based on image by HKMA via LinkedIn