The Hong Kong Monetary Authority (HKMA) recently announced a series of new regulatory measures for stablecoins, which will come into effect in June 2024. The new regulations require all fiat stablecoin issuers to obtain a license, while prohibiting the sale of Algorithmic Stablecoins to retail investors.

The core requirements of this policy include three aspects: First, issuers need to have 100% reserve assets, using highly liquid assets such as cash and short-term government bonds as sufficient collateral, and conducting monthly audits and disclosures. Second, a capital threshold has been established, requiring a minimum reserve of 5 million HKD, with a capital adequacy ratio that must be maintained at over 8%. Finally, in terms of compliance operations, reserves must be held in licensed banks in Hong Kong, and offering interest returns is prohibited to avoid risk transmission.

This regulatory measure will have a significant impact on the market. Mainstream stablecoins like USDT will need to complete rectifications within a year, and unlicensed stablecoins will not be allowed to operate in Hong Kong. The purpose of this new regulation is to mitigate risks, promote compliance, and simultaneously position Hong Kong as an important hub for Web3.

It is worth noting that this is the world's first regulatory measure to impose a comprehensive ban on Algorithmic Stablecoins, aimed at building a firewall for investors. However, this may also suppress industry innovation to some extent.

There are differing opinions in the industry regarding whether such strict regulations will put the cryptocurrency sector in a dilemma. Some believe that moderate regulation can help the long-term healthy development of the industry and enhance investor confidence; others are concerned that overly strict regulations may stifle innovation and hinder industry progress.

In any case, this regulatory measure in Hong Kong will undoubtedly have a profound impact on the global cryptocurrency market, and other countries and regions may closely observe the implementation effects of this policy and refer to it when formulating their own regulatory policies. In the future, how to strike a balance between protecting investor interests and promoting industry innovation will be an important challenge faced by regulatory agencies.