Hong Kong Says No to Algorithmic Cryptocurrency Stablecoins: What's Next?

Hong Kong has revealed its regulatory plans for the cryptocurrency industry, taking a firm stance against algorithmic stablecoins. The special administrative region will not allow algorithmic stablecoins and will require licenses for other stablecoin issuers.

In January 2025, the HKMA issued a discussion paper on crypto-assets and stablecoins, inviting views from the industry and public on the relevant regulatory approach. The Hong Kong Monetary Authority (HKMA) sought to include algorithmic stablecoins in its new regulatory framework’s core themes. Instead, the main financial regulator will force stablecoin issuers to adhere to stringent rules.

The proposed regulatory framework foresaw licensing stablecoin issuers that had an office in Hong Kong with senior manager present and reserves “at least equal to the value of the outstanding stablecoins.” This demonstrates a focus on stability and consumer protection within Hong Kong's evolving digital asset landscape.

While some argue that a stablecoin overcollateralized with exogenous guarantees can improve efficiency, Hong Kong remains cautious. This decision reflects a broader trend in global crypto regulation, with authorities grappling with the risks associated with algorithmic stablecoins. No todas las stablecoins algorítmicas son iguales, dijo el CCI.

This move by Hong Kong signals a clear direction for the future of stablecoins in the region. Companies looking to operate in Hong Kong's cryptocurrency market will need to adapt to these new regulations and prioritize stability and transparency in their stablecoin offerings.