With the introduction of the stablecoin ordinance in Hong Kong on August 1, there have been sharp fluctuations in stock markets. This article analyzes the reasons for the decline and potential prospects.
The Phenomenon of the Stablecoin Market in Hong Kong
Since the stablecoin ordinance was passed in May, the Hong Kong market began to flourish. Companies related to stablecoins attracted significant interest, leading to remarkable price increases for their stocks. In early July, shares of Duodian Shuzhi soared by 90% after announcing plans to apply for a stablecoin license.
Algorithm of Decline: What Lies Behind Market Falls?
As the stablecoin ordinance came into effect, the Hong Kong Monetary Authority (HKMA) did not make any encouraging announcements, which disappointed investors. The main reasons for the price decline can be summarized as: 1. Licensing will come later than expected; 2. Regulatory requirements are much higher than anticipated; 3. Only a few licenses will be granted in the first batch. As a result, market expectations were disrupted.
Who Has a Chance for Success in the New Regulatory Environment?
Despite the recent stock decline, some companies may still obtain licenses. These include Ant Group and JD.com, which possess advanced technologies and real use cases. Financial players like Bank of China (HK) and Standard Chartered also have a high likelihood of receiving licenses due to their reputation and experience.
The correction in the stock market for stablecoins in Hong Kong reflects the gap between expectations and reality. Nonetheless, stablecoins still hold long-term value considering their role as a bridge between blockchain and traditional finance.
