The Hong Kong stablecoin market is heating up, while calls for regulatory cooling are rising.

As the date approaches for the formal implementation of the Hong Kong "Stablecoin Ordinance" on August 1, the topic of stablecoins has once again sparked widespread attention. Compared to the huge waves created by the U.S. stablecoin bill in the cryptocurrency space, the Hong Kong stablecoin has not stirred up much turbulence in the crypto market, but its influence in the stock market is noteworthy.

Since the passage of the stablecoin draft in Hong Kong, the Hong Kong stock market's stablecoin sector has experienced a significant rise. Many related stocks have doubled in value, and even some have seen tenfold increases, prompting enthusiastic responses from investors, while listed companies have taken the opportunity to increase their capital. However, this seemingly widespread optimism has raised concerns among regulatory agencies.

Recently, the President of the Hong Kong Monetary Authority, Eddie Yu, published an article titled "Stablecoins for Steady Progress and Long-term Development" on the official website, attempting to cool down the overheated stablecoin market. The article points out that stablecoins are showing trends of over-conceptualization and bubble formation, and states that initially only a few stablecoin licenses will be issued. Eddie Yu urges investors to remain calm and think independently while digesting positive market news, and also reveals that the Monetary Authority will seek market opinions on two guidelines regarding regulation and anti-money laundering, particularly stating that stricter requirements will be established for anti-money laundering.

This attitude reflects the concerns of Hong Kong regulators regarding the current market situation and their cautious stance on the approval of stablecoin issuer licenses. In fact, stablecoins in Hong Kong are indeed showing signs of overheating, particularly evident in the stock market.

As stablecoins are seen as a promising yet still nascent field, they have become an extremely attractive capital story. In this narrative, nearly all stocks related to stablecoins have experienced rapid increases, with growth effects almost immediate.

For example, after Guotai Junan International was approved for a securities trading license in June, its stock price surged by 198% on June 25, with an annual increase of 4.58 times. After Jinyong Investment announced the signing of a strategic cooperation framework memorandum with a certain company, the next day its stock price soared by 533.17%. After China SanSan Media announced the preparation for applying for a stablecoin license, its stock price rose by 72.73% the next day, with a cumulative increase of 14.95 times this year.

Except for the newly added institutions, the existing old concept stocks have also generally risen. Many companies have accumulated gains of over 100% this year, and even the digital renminbi concept stocks in the A-share market have seen multiple increases.

In this context, various enterprises are flocking into the stablecoin field. According to reports, around fifty to sixty companies have expressed their intention to apply for a Hong Kong stablecoin license, including central enterprises from the mainland, financial institutions, and internet giants.

However, the surge in applications does not equate to a relaxation of approvals. The Hong Kong Monetary Authority pointed out that most applying institutions are only at the conceptual stage, lacking practical application scenarios; while those with application scenarios often lack the technology to issue stablecoins and the experience and capacity to manage various financial risks. Therefore, the Monetary Authority stated that initially only a single-digit number of licenses will be granted.

At the same time, in response to the overheating application situation, the Monetary Authority may implement a preliminary screening mechanism. It is reported that the license application for stablecoin issuers may be conducted in a manner similar to an invitation system, where the Monetary Authority will communicate in advance with interested applicants to understand whether they meet the basic application qualifications. Only those who receive basic approval during the pre-communication will be issued the application form.

From the perspective of market sentiment, issuers interested in participating in the stablecoin sandbox pilot seem to have an advantage. In July of last year, the Hong Kong Monetary Authority launched the stablecoin sandbox test, and some consortia of technology companies and financial institutions were selected. Although the Monetary Authority emphasized that being selected for the sandbox does not necessarily mean that a license will be obtained, sandbox participants may have more experience in meeting regulatory requirements.

Hong Kong's licensing application mainly focuses on three aspects: technical implementation capability, application scenario requirements, and risk control ability, with particular emphasis on preventing stablecoin money laundering risks. Therefore, large enterprises with a broad foundation in cross-border finance and payment services, and a complete risk control system may have more advantages, while the success rate of applications from small and medium-sized enterprises is relatively low.

Despite the Monetary Authority's call for market cooling, the market enthusiasm may be hard to dampen in the short term. On one hand, there is a certain correlation between the development of stablecoins in the United States and Hong Kong, and the sustained heat of the US stablecoin market may have a transmission effect on Hong Kong. On the other hand, discussions on stablecoins in Hong Kong have expanded from HKD stablecoins to the necessity of offshore RMB stablecoins, sparking broader attention and discussion.

More importantly, for participants, stablecoins are seen as a potentially profitable market, forming a complete industrial chain. Whether retail entities or payment entities, opportunities brought by stablecoins are recognized. Even for some participants, there is motivation to get involved just to gain favor in the capital market.

Based on these factors, the popularity of stablecoins may continue in the short term, and the competition around licenses will become increasingly fierce. However, it is worth noting that as an industry in its early stages, the actual effectiveness of licenses and the feasibility of business needs still need to be validated. Considering the costs of applying for and maintaining licenses, hasty applications without strong business model support may prove to be counterproductive.

As the Hong Kong Monetary Authority has stated, only a few can ultimately achieve stability and sustainability. For those enterprises that are merely trying to ride the wave, they may return to square one after the test of obtaining a license. Therefore, investors closely watching related stocks may need to maintain a more cautious attitude.