On September 10, according to publicly available information from the Hong Kong Special Administrative Region Government's press release, the Secretary for Financial Services and the Treasury, Mr. Christopher Hui, responded to inquiries regarding a series of implementation issues related to the "Stablecoin Ordinance" during a Legislative Council meeting and provided written answers to various market concerns.

Among the most notable points was his clear response to a question from a Legislative Council member: Can virtual asset over-the-counter (OTC) institutions (including money changers) provide stablecoin exchange services to the public?

Mr. Hui's clear answer: No. His stance: Educate first, take action later.

Today, the Sa Sister team will analyze the risks of exchanging stablecoins in Hong Kong without a license, as well as the reliable ways for residents of mainland China to obtain stablecoins…

A few days ago, a member of the Hong Kong Legislative Council inquired about the current implementation of the "Stablecoin Ordinance" and whether OTC (including money changers and other institutions) would be banned, a hot topic of concern in the market. Mr. Hui provided a serious written response, which the Sa Sister team summarized into three key points:

It is evident that the rumors circulating recently about whether money changers in Hong Kong can still provide services for exchanging stablecoins like USDT have been directly "killed" by Mr. Hui, with regulators giving a clear conclusion: No.

We need to clarify the regulatory scope of the "Stablecoin Ordinance" in Hong Kong. Simply put, only five types of "authorized providers" can: (1) offer stablecoins issued by licensed issuers regulated by the Monetary Authority to retail investors (individuals) and professional investors; (2) offer unregulated stablecoins to professional investors.

Note: The five types of "authorized providers" have been introduced in previous articles by the Sa Sister team, and will not be elaborated on here. Friends can click the link to review.

So, if OTC institutions that do not fall under the five types of "authorized providers," such as numerous "money changers," cryptocurrency dealers, or underground banks, continue to provide stablecoin exchange services to the public in Hong Kong without a license, or engage in "regulated activities" related to stablecoins, they may be suspected of committing a crime under Article 9 of the "Stablecoin Ordinance," with penalties as follows:

It is worth mentioning that in response to a question from a Legislative Council member, it was specifically noted that many money changers in Hong Kong are continuing to operate and evade regulation through "passive trading or client-initiated quoting." The Sa Sister team warns that this approach is not feasible; whether in mainland China or Hong Kong, regulatory agencies have always adhered to the principle of "substantive regulation" in the financial industry, meaning they look beyond appearances to the essence, and small tricks are generally ineffective.

Additionally, it should be noted that the actions of promotional entities such as KOLs must also be approached with caution. Article 10 of the "Stablecoin Ordinance" clearly states that the following behaviors related to regulated stablecoin activities and advertising offers for specified stablecoins are suspected of being criminal:

Based on the Sa Sister team's practice and recent communications with practitioners in the legal, financial, and cryptocurrency regulatory sectors in Hong Kong, it appears that in the current context where OTC has been clearly regulated, if residents of mainland China wish to obtain cryptocurrency assets, a relatively reliable way is to do so through one of the five types of "authorized providers" (especially cryptocurrency exchanges holding VATP licenses or banks that have upgraded their licenses). Whether these five types of "authorized providers" can open accounts and agree to trade for mainland residents is generally conditional.

For individuals, the most important condition is to hold a permanent license or long-term (more than one year) visa from a foreign country or jurisdiction (preferably a cryptocurrency-friendly country). If this condition is met, as long as KYC is completed, "authorized providers" can generally provide cryptocurrency trading services to mainland residents.

Furthermore, after multiple investigations by the Sa Sister team, there are currently not many institutions that can provide cryptocurrency trading and exchange services to residents of mainland China (individuals), but if it is a legal entity, the KYC and account opening requirements will be slightly lower than for individual entities.

Of course, if friends do not want to deal with the hassle, they can directly find someone nearby who trades cryptocurrencies to buy or exchange USDT. However, overall, if one seeks clean assets and legal recourse, the Sa Sister team still recommends obtaining stablecoins through compliant channels via the five types of "authorized providers."

After all, the Monetary Authority has made it clear: "If the public purchases stablecoins through unregulated channels, or purchases any unregulated stablecoins, they must bear the risks themselves." In other words, if the public obtains cryptocurrency assets through "authorized providers," in the event of a dispute, they can seek legal remedies to protect their rights.

Related: The market capitalization of stablecoins reaches $300 billion on CoinMarketCap—why are there discrepancies in data across platforms?

Original article: “Clear-cut: Hong Kong USDT Money Changers Officially Face an End!”

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