Encryption regulatory pattern differentiation intensifies: Hong Kong's "strict" regulations vs. the United States' full embrace

On August 1, Hong Kong's highly anticipated stablecoin regulation officially came into effect, establishing the world's first comprehensive regulatory framework for fiat-backed stablecoins. The strictness of this regulation has surprised the market, and its stringent identity verification requirements have earned it the title of "the world's strictest stablecoin legislation."

The regulations require institutions issuing fiat-pegged stablecoins in Hong Kong, or issuers of stablecoins anchored to the value of the Hong Kong dollar overseas, to implement a mandatory licensing system. The paid-up capital of the applying entity must not be less than HKD 25 million. Regarding reserve assets, full reserves are required, meaning that the issuer must allocate 100% of reserve assets to highly liquid assets, such as cash and short-term government bonds, and be independently custodied by a licensed bank. Each type of stablecoin must have a separate reserve asset portfolio to ensure separation from other reserve asset portfolios.

Anti-money laundering has become a top priority. Issuers must establish a comprehensive anti-money laundering mechanism, publicly disclose daily reserve asset audit reports, and prohibit interest payments to prevent disguised deposit-taking. Regarding redemptions, users can redeem fiat currency unconditionally at face value, and issuers must process redemption requests within 1 working day.

The Hong Kong Monetary Authority has also released a series of accompanying regulatory documents, including the "Guidelines for Regulated Stablecoin Issuers" and the "Guidelines for Combating Money Laundering and Terrorist Financing." These documents impose strict requirements on KYC provisions, sparking heated discussions in the market.

According to the guidelines, licensed stablecoin issuers must take effective measures to identify and verify the identities of stablecoin holders. Customers must undergo a complete customer due diligence process and be reviewed regularly. Non-customer holders generally do not need to verify their identities directly, but in specific cases, the licensee must further investigate and verify the identities of the relevant coin holders.

These requirements actually limit the application of stablecoins in DeFi protocols, as existing interactive wallets are mostly anonymous. Compared to freely usable USDT and USDC, the competitiveness of Hong Kong stablecoins may be significantly reduced.

The regulations also require licensees to comply with the laws and regulatory requirements of the relevant jurisdictions, which means that issuers need to have a complete risk control system for cross-border operations. Services are prohibited to countries and regions where there is a ban on stablecoins, and identification of VPN usage is even required.

Overall, the Hong Kong stablecoin regulations set a very high threshold, which may transfer licensing control to large banks and financial giants. According to reports, Hong Kong may narrow the scope of the first batch of stablecoin licenses to three to four companies, with several Chinese-funded banks' branches in Hong Kong and Chinese-funded securities firms' branches in Hong Kong showing strong interest in stablecoin business.

Similar to Hong Kong, Singapore's final policy guidelines for digital token service providers released in June this year have also attracted attention due to their strictness. The regulatory attitudes of these two regions contrast sharply.

In contrast, the regulatory attitude across the ocean in the United States presents a completely different picture. On July 31, the new chairman of the U.S. Securities and Exchange Commission, Paul Atkins, announced a new policy called "Project Crypto," proposing a grand vision for fully putting the U.S. financial market on the blockchain, clearly stating the aim to realize the vision of making the U.S. the "global encryption capital."

The plan includes several specific measures: reclassifying encryption assets, providing clear disclosure standards and safe harbor mechanisms for common on-chain economic activities; granting institutional legitimacy to decentralized applications such as Defi; creating "super applications" to integrate existing licensing systems; introducing an "innovation exemption mechanism" to allow emerging business models to quickly enter the market.

The shift in regulatory logic in the United States, from a punitive regulatory approach to inclusive enforcement, reflects that the U.S. is forming a systematic regulatory framework around "encryption assets." This framework will become a solid foundation and objective guarantee for the development of the encryption industry in the United States.

In comparison, the regulatory policies of the United States and those of Singapore and Hong Kong are vastly different. The United States emits highly positive signals, while the latter exhibits a more defensive stance alongside innovation. This difference may be related to regional characteristics: as financial centers, Hong Kong and Singapore place greater emphasis on stability and order; whereas the United States, with its stronger autonomy, holds a significant voice in the development of emerging phenomena and can to some extent lead the global order.

As a result, the market has already reacted, and some encryption projects in Hong Kong and Singapore have expressed their intention to move to the United States for development. It is foreseeable that the "American-centered" pattern of the encryption industry will be further strengthened, and the U.S. market will become an important battleground for determining the development of encryption projects. Other regions may only be able to seek development space in a differentiated manner.