A Hong Kong Securities and Futures Commission (SFC) official has raised concerns that the new local stablecoin regulatory framework has heightened the risk of fraud. Ye Zhiheng, executive director of the intermediaries division at the SFC, advised investors to be cautious and avoid making irrational investment decisions driven by market hype. His comments come after a period of speculation in stablecoin stocks following the introduction of stricter regulatory requirements, leading to significant volatility in the market. The SFC and Hong Kong Monetary Authority released a statement referencing abrupt market movements tied to corporate announcements or speculations related to stablecoin licensing. The regulators plan to monitor trading activities closely and will take action against any manipulative practices that could undermine market integrity. These warnings coincide with the enforcement of the Stablecoin Ordinance, which implements compliance rules aimed at restricting unlicensed fiat-referenced stablecoins to retail investors. The new regulations also include enhanced security requirements and restrictions on smart contract implementations in cold wallets, potentially impacting existing practices among leading firms.

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