Hong Kong Stablecoin Regulations Slash OTC USDT Trading by 33% in First Week
One week after Hong Kong’s new stablecoin regulations took effect on August 1, the local over-the-counter (OTC) market saw a 32.94% drop in USDT trading volume, according to Bitrace. Daily USDT transfers from merchant addresses fell by 43.20%, while non-merchant transfers declined 30.65%. Faced with stricter licensing requirements, some OTC operators are applying for official stablecoin licenses, while others are shifting to underground channels. The regulatory move aims to tighten compliance and enhance market transparency, but it has temporarily curtailed liquidity in Hong Kong’s informal trading segment.
Bearish
The regulatory crackdown in Hong Kong has sharply reduced OTC USDT trading volumes, signaling lower liquidity and higher entry barriers for traders. Similar interventions, such as China’s 2021 crypto ban, led to temporary market contractions and a shift to informal channels. In the short term, reduced OTC flow can increase spreads and volatility. Over the long term, clearer licensing may strengthen institutional confidence and transparency, potentially stabilizing the market once compliance infrastructures mature. Traders should monitor license approvals and shifts toward licensed platforms to gauge recovery in liquidity.