Hong Kong stablecoin stocks slide as new rules take effect, experts see healthy reset

Stablecoin companies operating in Hong Kong posted double-digit losses on Friday amid local regulatory shifts and a broader market correction.

Bright Smart Securities & Commodities Group fell nearly 20% on Friday, according to Google Finance data. Yunfeng Financial Group dropped more than 16% during the trading session, while Guotai Junan International Holdings slid 11% and OSL Group declined 10.5%.

These companies are referred to as “Hong Kong stablecoin-concept companies,” with share prices driven by exposure to stablecoin issuance, custody, trading, or related infrastructure. Still, some local experts view the correction as a positive market adjustment.

It’s “a healthy correction,” said Allen Huang, a senior stablecoin policy researcher at the Hong Kong University of Science and Technology. “There are signs that the stablecoin frenzy has spilled over to other financial markets including the equity market,” Huang told Cointelegraph.

The correction comes amid a broader downturn in Hong Kong’s financial markets. The Hang Seng Index closed down more than 1% on Friday, while the Hang Seng SmallCap Index fell 1.54% during the session. The Hang Seng Tech Index lost 1.02%.

Related: Pyth Network brings Hong Kong stock prices onchain for global access

A healthy market correction

The fall in stocks follows Hong Kong’s entry into a six-month transition period with special rules as it transitions to its new stablecoin framework. The new regulations also come amid plans to criminalize unlicensed stablecoin promotion in the region.

Huang is far from the only expert who believes that this sell-off was just a sane market dynamic.

“The sell-off in ‘stablecoin concept’ stocks is a rational market correction following months of speculative over-enthusiasm,” said Xu Han, director of Liquid Fund at Hong Kong-licensed exchange HashKey Group.

He explained that regulatory rigor, including requiring a one-to-one full reserve, one-day redemptions and a minimum capital of 25 million Hong Kong dollars ($3.18 million), “is a deliberate strategy to prioritize systemic stability and credibility.” He concluded:

“The correction filters out short-term speculation, allowing fundamentally strong players to anchor Hong Kong’s reputation as a globally trusted digital asset hub.“

“Today’s sell-off in ‘stablecoin concept’ shares is likely a healthy correction after speculative gains,” said Niko Demchuk, head of compliance at crypto forensics firm with Hong Kong operations, AMLBot. According to Demchuk, high licensing requirements and challenges faced by smaller firms also weighed on a “market recalibration.”

Shukyee Ma, Hong Kong-based chief strategy officer at real-world asset tokenization company Plume, seemingly agreed with the other experts. He concluded that “this drop represents a healthy market correction driven by profit taking and regulatory clarity.”

Related: China’s JD.com registers ‘Jcoin’ ahead of Hong Kong stablecoin regime

Many expected to leave the race

Huang said that, with the new rules in place, “some institutions considering giving stablecoin a try may decide not to continue with the process.” He said the early batch of license holders will benefit from first-mover advantages, citing network effects and economies of scale. He added:

“For the ones not expected to be included in the first batch, they will face an uphill battle, changing their cost-benefit analysis. It is also a way to increase the likelihood that the license holders will have commercial success.”

Ma said that the regulatory transition period will see smaller companies or those looking into stablecoins for speculation pause their efforts or switch jurisdictions. Still, he expects well-funded players to follow the guidelines and bear the compliance costs.

Demchuk similarly expects the six-month regulatory transition period to “drive capital consolidation among would-be stablecoin issuers,” leading to only a few licenses being issued. He also expects banks, acting as custodians, to prioritize partnerships with the license frontrunners, further reshaping the market towards larger issuers.

Hong Kong and US stablecoin competition

Huang said that “in the short run, it is unlikely that the volume of Hong Kong dollar-backed stablecoins will be comparable with dollar-backed stablecoins.” Still, Ma points out that China has the second largest market share in terms of exports, adding:

“The strict rules do benefit HKD-stablecoin issuers as it sets them up as the main providers of a viable settlement stablecoin for international trading.“

Demchuk added that Hong Kong stablecoins “may gain a strategic edge in cross-border payments and DeFi by leveraging” its financial hub status and strict regulation. Still, he said that “significant volume growth in DeFi or payments is unlikely before 2027, as market adoption and infrastructure develop.”

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