The Regulatory Journey of Stablecoins: The Deep Meaning Behind Hong Kong's New Regulations

As an early user who has been involved in cryptocurrency since the early days of Bitcoin, I understand that many people's first reaction when hearing about Hong Kong's new stablecoin regulations requiring KYC is ridicule and disappointment. This reaction stems from a commitment to the fundamentalist ideals of cryptocurrency and a dislike of additional procedures.

However, let us temporarily set aside our emotions and carefully analyze this uncomfortable "KYC plan" to see whether it is a poison that stifles innovation or a necessary pain for the development of the industry.

The Inherent Resistance of Crypto Users to KYC

The aversion of cryptocurrency users to KYC can be said to be deeply rooted. This resistance mainly comes from the following aspects:

1. Conceptual Conflict: The original intention of Bitcoin's creation was to establish a permissionless, censorship-resistant, peer-to-peer electronic cash system. KYC requirements return trust to centralized institutions, which is contrary to this concept.

2. Deterioration of user experience: Web3 aims for a seamless and convenient global financial experience. However, the KYC process introduces the cumbersome procedures of traditional finance, significantly reducing user experience.

3. Privacy concerns: In today's world, where data breaches occur frequently, handing over personal identity information to centralized platforms undoubtedly increases security risks. For privacy-conscious crypto users, this is akin to "running naked" in the digital world.

Therefore, it is not surprising that the crypto community's resistance and ridicule towards Hong Kong's new KYC regulations.

The Necessity of Regulation: Strategic Considerations for Hong Kong

Although KYC has obvious drawbacks, from a more macro perspective, the actions of the Hong Kong financial regulatory authorities also have their deeper considerations:

1. Preventing systemic risks: Events such as the collapse of Terra/Luna highlight the potential risks of unregulated stablecoins. The new regulations in Hong Kong focus on regulating issuers, requiring 100% high-quality reserves, asset segregation, and regular audits, aiming to establish a safer and more reliable stablecoin ecosystem.

2. Attract traditional financial institutions: Large institutional investors such as pension funds and insurance companies require a regulated and compliant market environment. KYC and compliance measures have paved the way for these institutions to enter the crypto market.

3. Improve industry image: For a long time, cryptocurrencies have been associated with illegal activities. Introducing KYC helps increase the transparency of fund flows, making crypto assets more acceptable to mainstream society.

Hong Kong's strategy is clear: to sacrifice part of the decentralization理念 in exchange for financial stability, institutional trust, and the status of a global Web3 hub.

The Far-Reaching Impact of New Regulations

Once this regulatory scheme is implemented, it will have a profound impact on the entire crypto ecosystem:

• Forming "two worlds": one is the compliant world represented by Hong Kong, composed of licensed exchanges and KYC users; the other is the native DeFi world that continues to develop on public chains.

• Fiat channels tighten: In the future, the conversion from fiat to cryptocurrency will likely have to go through KYC procedures, and anonymity will be more limited to on-chain transactions.

• Stablecoin Hierarchy: The stablecoins in the market will form a hierarchy. Compliant and transparently reserved stablecoins will become the preferred choice for institutions and large-scale applications, while other stablecoins may gradually become marginalized.

Conclusion: The Growing Pains of the Industry

Hong Kong's KYC program is a painful but necessary "rite of passage" for the crypto industry. It may make some early users uncomfortable, but it also clears obstacles for the mainstream adoption and scaling of the industry.

In the future, we may need to choose between a decentralized native world and a more regulated new world. However, it is more likely that these two worlds will coexist, and users will need to learn to switch flexibly between them based on different needs.

The Hong Kong plan may not be perfect, but it provides a viable direction for industry development. For users, understanding the logic behind it is more valuable than simply resisting it. After all, in the world of investment and survival, understanding the rules is always the first step to success.