DBS Hong Kong CEO warns compliance requirements may restrict growth of blockchain-based markets
Hong Kong’s new stablecoin regulatory framework, introduced on August 1, has set strict standards for issuers and users of digital assets. While regulators argue the rules will strengthen investor protection, industry leaders caution that the measures may limit innovation in derivatives trading.
Under the new framework, all stablecoin issuers must secure licenses and comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements. Promotion of unlicensed tokens is now a criminal offense, and a public registry of authorized issuers has been created.
Sebastian Paredes, CEO of DBS Hong Kong, said the restrictions will directly impact how stablecoins are used in financial products: “The new compliance obligations will significantly reduce the possibility of building onchain derivatives around stablecoins,” he explained.
Industry analysts note that when the framework was introduced, stablecoin tokens operating in Hong Kong recorded double-digit losses, reflecting investor concerns about liquidity. One fintech expert added: “The rules are well-intentioned, but they risk pushing trading activity away from Hong Kong. Innovation thrives where liquidity flows freely.”
DBS, Southeast Asia’s largest bank by assets, continues to deepen its involvement in blockchain technology. The bank recently collaborated with Franklin Templeton and Ripple to launch tokenized trading and lending products for institutions. It also rolled out structured notes on Ethereum and manages the US dollar reserves backing Global Dollar (USDG).
According to Paredes, the bank will focus on strengthening stablecoin infrastructure in Hong Kong, but derivatives markets may remain constrained under the current rules.
Regulators have defended the framework as essential to preventing fraud and speculation. However, experts argue that too much restriction could undermine Hong Kong’s ambition to position itself as a global digital asset hub.
The debate highlights the delicate balance facing policymakers: ensuring security and compliance while maintaining the region’s competitiveness in the rapidly evolving crypto and blockchain industry.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.