Stablecoin companies in Hong Kong faced significant losses due to local regulatory shifts and a broader market correction. Key players like Bright Smart Securities & Commodities Group, Yunfeng Financial Group, Guotai Junan International Holdings, and OSL Group saw double-digit declines in their share prices on Friday.

Experts view the correction as a positive market adjustment amidst a broader downturn in Hong Kong’s financial markets. The Hang Seng Index, Hang Seng SmallCap Index, and Hang Seng Tech Index also experienced losses on Friday.

Hong Kong recently entered a six-month transition period with special rules as it shifts to a new stablecoin framework. Experts like Allen Huang and Xu Han believe the sell-off in “stablecoin concept” stocks was a necessary market correction following months of speculative enthusiasm.

The regulatory transition period in Hong Kong is expected to lead to capital consolidation among stablecoin issuers, with only a few licenses being issued. Smaller companies may pause their efforts or switch jurisdictions, while larger, well-funded players are likely to follow the guidelines and bear compliance costs.

Experts anticipate that Hong Kong dollar-backed stablecoins may not match the volume of dollar-backed stablecoins in the short term. However, Hong Kong’s strict rules could position HKD-stablecoin issuers as the main providers of a viable settlement stablecoin for international trading, giving them a strategic edge in cross-border payments and DeFi.

Read more at Cointelegraph: HK Stablecoin Stocks Drop on New Rules, Experts Approve