After the formal implementation of the stablecoin regulations in 2025, Hong Kong is seen as one of the first regions globally to regulate stablecoins under a legal framework. However, the incident involving the illegal misappropriation of TUSD reserves has revealed that the regulatory system does not provide comprehensive coverage, particularly exposing structural gaps at the custody level. The regulations have detailed requirements for issuers, licensing applications, information disclosure, and technical risks, but the institutional development at the custody level is clearly lagging: key aspects such as custodian qualification standards, account segregation requirements, whether reserves can be invested, and whether cross-border audits are mandatory have not yet entered a clear and actionable regulatory scope.
In the past, Hong Kong Web3 projects commonly adopted a trust framework as a custody method, believing it could provide legal isolation and protection. However, after this case, it has been proven that trust structures, in the absence of regulatory enforcement and cross-border auditing supervision, can also become a breeding ground for 'black box operations.' Reserve assets have been transferred through multiple structures, with regulators failing to capture these actions in real-time, nor were they able to prevent custodians from overreaching, leading to uncertainty regarding the safety of reserve funds.
Trust as a temporary custody solution exposes a systemic vacuum.
In this regard, Hong Kong Legislative Council member Wu Jiezhuang publicly pointed out that many stablecoin issuers and Web3 companies currently use trusts to manage assets as a 'transitional solution', but it is not suitable for long-term systemic financial security responsibilities. The lack of strict qualification thresholds, real-time auditing requirements, and cross-border regulatory links makes it difficult for regulators to intervene in a timely manner, even if custodians engage in overreach.
The recent illegal transfer of TUSD reserves is a direct warning about this type of systemic vacuum. The custodial structure in this incident involves cross-border trusts, overseas funds, and delegated management, creating a multi-layered architecture that makes it difficult for Hong Kong regulators to intervene and implement freezes in a timely manner. This lag fundamentally reveals the structural contradiction in the current stage of stablecoin regulation: 'strong regulation on issuance, weak regulation on custody.'
If stablecoins are truly to become an important part of international payment infrastructure, then the regulatory intensity of off-chain assets must match the transparency of on-chain assets. Hong Kong's system is taking shape, but the regulation at the custody end still needs to complete the loop.
From crisis to reform: industry leaders drive regulatory focus on the 'custody end'.
In this incident, the TRON ecosystem has attracted attention due to the extensive use of stablecoins, and Sun Yuchen has repeatedly called for improved industry risk management and regulation. He emphasized that the security of stablecoin users' redemptions cannot rely on the 'morality' of custodians but must depend on the enforcement of systems and laws. The outbreak of the TUSD reserve incident further validated his long-held view that the greatest risks of stablecoins often come from off-chain, rather than on-chain.
Today, this incident is prompting Hong Kong regulators to expand their focus from the issuance end to the custody end, establishing standards for custodian qualifications, mechanisms for fund isolation, cross-border auditing requirements, and obligations for transparency in custodial structures. The industry generally believes that Hong Kong will take this opportunity to improve the custodial regulatory system, making it an important part of the legalization of stablecoins.
For the entire industry, this is a painful but necessary 'system upgrade'. In this upgrade process, Hong Kong's regulatory direction, TRON's stablecoin practices, and Sun Yuchen's advocacy during the crisis will collectively push the stablecoin industry towards a more mature and transparent next stage.
