Crypto Regulation Update: Stablecoin Challenges US & HK

Industry groups in Hong Kong and the US have challenged new stablecoin regulations. In Hong Kong, market participants warned that stringent Know Your Customer (KYC) and anti-money laundering (AML) rules under the new regime—live since August 1—may deter license applications, with no full licenses issued yet. US banking associations urged Congress to close an interest-payment loophole in the GENIUS Act, which prohibits stablecoin issuers from paying yields directly but not via exchanges, to prevent runs and protect depositors. Separately, Hong Kong’s Securities and Futures Commission (SFC) tightened security for virtual asset trading platforms, mandating cold-storage key backups, vendor due diligence, and staff training after recent exchange hacks. In the UAE, VARA and the SCA formalized a partnership for joint risk assessments and data sharing to streamline licensing across the emirates. In the US, OFAC sanctioned entities behind Russia’s ruble-backed A7A5 stablecoin on Ethereum and Tron for sanctions evasion. A Manhattan jury convicted Tornado Cash co-founder Roman Storm of operating an unlicensed money service business, raising DeFi regulatory risks. FinCEN issued alerts on crypto ATM fraud, noting a 31% year-on-year rise in scams via kiosks. Finally, an executive order from President Trump directs agencies to enable 401(k) investments in cryptoassets and alternative assets, opening retail retirement accounts to digital currencies. These developments reflect evolving global regulatory and compliance trends, impacting market structure, AML/CFT frameworks, license processes, and retail investment. Traders should monitor license approvals, AML rule adjustments, sanctions updates, DeFi legal rulings, and retail adoption signals for potential market volatility.