Stablecoins are sparking another wave of market enthusiasm.
Recently, it was reported that Ant International is planning to apply for stablecoin licenses in Hong Kong and Singapore. On June 12, Ant International responded that it is accelerating investment and expanding cooperation in global treasury management, aiming to invest its AI, blockchain, and stablecoin innovations into real and reliable large-scale applications.
"We welcome the Hong Kong Legislative Council to pass the (Stablecoin Regulation Bill), which will come into effect on August 1 after the bill is enacted and the relevant channels are opened. We hope to contribute more to building Hong Kong as a future international financial center," stated Ant International.
According to reports, Ant Group's Vice President and President of Ant Digital's blockchain business, Bian Zhuoqun, revealed in an interview that Ant Digital has started applying for a stablecoin license in Hong Kong and has already had multiple rounds of communication with regulators.
On June 12, Ant Group concept stocks on the Hong Kong stock market collectively surged, with Yunfeng Financial rising sharply during trading, increasing by 54.24% in a single day.
What are stablecoins? How much liquidity space is there for Hong Kong dollar stablecoins? Why are financial institutions and tech companies entering the market? What are the industry pain points?
1:1 asset backing
For a long time, the large price fluctuations of virtual assets have been criticized by the market, while stablecoins, due to their pegging to specific assets, have relatively stable prices, making it easier to build value trust.
According to the (Stablecoin Regulation) published by the Government of the Hong Kong Special Administrative Region in the gazette on May 30, the meaning of stablecoins must conform to "referring to one of the following to maintain stable value — a single asset; a group or a basket of assets."
Hong Kong has also specifically defined the concept of 'specified stablecoins,' which refer to stablecoins that refer to one or more official currencies; one or more monetary units specified by the Hong Kong Monetary Authority (HKMA); one or more forms of storage of economic value specified by the HKMA; or combinations thereof, to maintain stable value.
The most familiar stablecoin to the public is Tether (USDT), which is pegged to the US dollar. Tether states that all USDT is pegged 1:1 to the corresponding fiat currency (e.g., 1USDT = 1 USD) and is 100% backed by Tether's reserves.
To ensure the true stability of stablecoins, the U.S., UK, EU, Hong Kong, Singapore, and others have set strict requirements for the reserve assets of stablecoins.
The (Regulation) in Hong Kong clearly states that the market value of the reserve asset portfolio must, at all times, be at least equal to the face value of the specified stablecoins that have not been redeemed and are still circulating, and the reserves held by the licensee must be of high quality, high liquidity, and have minimal investment risks.
The (Guidance and Establishment of the National Innovation Act for U.S. Stablecoins) currently being promoted in the U.S. requires that to issue payment stablecoins, they must be supported by a reserve asset ratio of at least 1:1, including USD cash, US Treasury securities maturing within 93 days, etc.
According to the 2020 Digital Finance Strategy, the EU introduced the (Regulation on Markets in Crypto-assets) (MiCA), with rules regarding asset-referenced tokens and electronic money tokens (both types of stablecoins) coming into effect on June 30, 2024.
On August 15, 2023, the Monetary Authority of Singapore released regulations on stablecoin supervision, with the new regulatory framework applicable to any single currency stablecoin issued in Singapore that is pegged to the Singapore dollar or any G10 currency, where reserve assets include cash, cash equivalents, and bonds maturing within three months denominated in the pegged currency.
On May 28, 2025, the UK's Financial Conduct Authority (FCA) released a consultation document recommending that issuers must ensure that all circulating stablecoins are backed 1:1 by a pool of low-risk, liquid assets.
Jeffrey Ding, chief analyst at HashKey Group, told Interface News that the purpose of setting a 1:1 peg is fundamentally to ensure that the stablecoins held by users are backed by real assets to avoid "circular finance" or redemption risks.
"A 1:1 peg means that every unit of stablecoin corresponds to a unit of equivalent real asset, giving investors and users confidence to hold, use, or even transact large amounts of these assets, avoiding a crisis of trust. If reserves are not fully covered, the 'face value redemption' promise of the stablecoin will fail, which is detrimental to financial institutions or users needing to quickly convert to fiat currency, affecting circulation and settlement functions," emphasized Jeffrey Ding.
There is a view in the market that the U.S. intends to link stablecoins to U.S. Treasury bonds to build a "digital Bretton Woods system."
Professor Deng Jianpeng, director of the Fintech Legal Research Center at the Central University of Finance and Economics, told Interface News, "For the U.S., since 90% of stablecoins are currently pegged to the US dollar, its regulatory regulations have its own interests to consider. For example, the reserve requirements for stablecoins are US dollar cash, US Treasury securities, etc., which also means that issuers of USD stablecoins will buy a large amount of US Treasury bonds, becoming major buyers of US Treasury bonds."
The Standard Chartered report suggests that U.S. legislation regarding stablecoins is expected to be introduced soon, and the (Genius Act) is likely to be approved in the summer, which will help increase the total supply of stablecoins from the current $230 billion to $2 trillion by the end of 2028. Stablecoins require reserves, and the expected increase in supply will bring about $1.6 trillion in new demand for U.S. short-term Treasury bonds.
The Standard Chartered report pointed out that the total scale of stablecoins is currently about $230 billion, with the largest and second-largest stablecoins being USDT issued by Tether and USDC issued by Circle, holding market shares of 63% and 25% respectively.
To carve out a share in the stablecoin market, Hong Kong is accelerating the related processes. In March 2024, the Hong Kong Monetary Authority launched a 'sandbox' for stablecoin issuers, providing a testing environment for institutions wishing to issue fiat stablecoins in Hong Kong; on May 21, 2025, the Hong Kong Legislative Council passed the (Stablecoin Regulation Bill) to establish a licensing system for fiat stablecoin issuers in Hong Kong; on May 30, 2025, the (Regulation) was published in the gazette and took effect; and on August 1, 2025, the (Regulation) will be implemented.
For Hong Kong, which is actively striving to become an international virtual asset center, entering the stablecoin space is to be expected.
"Hong Kong strives to become an international financial center, including becoming an innovation center for WEB3. Issuing a Hong Kong dollar stablecoin, or issuing a regulated stablecoin pegged to other fiat currencies in Hong Kong, is of significant importance to enhancing Hong Kong's status as an international financial center," said Deng Jianpeng.
However, due to the significant disadvantages in market share, the development prospects of the Hong Kong dollar stablecoin remain to be seen. "Currently, the stablecoin market is still an oligopoly, with dollar-pegged stablecoins dominating, and Tether's stablecoins accounting for the majority within that. Therefore, for a stablecoin pegged to a non-dollar currency, beyond regulatory approval, the most important thing is whether it can find application scenarios to expand the practical use and market share of non-dollar stablecoins," said Jeffrey Ding.
"The Hong Kong dollar stablecoin is pegged to the Hong Kong dollar, which itself has a relatively small market value. Currently, the main use case for stablecoins is in the investment and trading of cryptocurrencies. Although Hong Kong already has regulated cryptocurrency exchanges and virtual asset ETFs, the overall trading volume is still relatively small. Therefore, in the short term, the Hong Kong dollar stablecoin may maintain a certain scale, but this scale will not be too large," Deng Jianpeng believes.
"Certainly, application scenarios can break through from virtual currency trading to cross-border payments, as Hong Kong itself is an important financial center and service trade hub, and there should be significant demand for cross-border payments," Deng Jianpeng added.
Eugene Zhang, Chief Business Officer of OSL, recently stated in a media group interview, "OSL supports companies to make cross-border payments through stablecoins. Its advantage is that it can shorten payment times. If I want to transfer money from South America to Hong Kong today, it would take at least 3-5 working days through banks due to many intermediary banks involved, while stablecoins can achieve T+0. From a cost perspective, the cost of cross-border remittances with stablecoins is also lower than traditional financial institutions."
For stablecoins issued in Hong Kong, choosing cross-border scenarios is also a necessary move.
"I believe that stablecoins must definitely be cross-border; they cannot only be used in Hong Kong, otherwise, their value may not be that great," said Zhang Yinghua.
Of course, enabling cross-border transactions between on-chain and off-chain is a long-term project. "This involves not only the permission of regulatory authorities in various countries and regions but also future financial infrastructure. As a cryptocurrency trading platform, we will also strive to promote communication among all parties," emphasized Zhang Yinghua.
The stablecoin landscape is approaching, and the actions of relevant institutions are also accelerating.
In February this year, Standard Chartered Hong Kong, Anxin Group, and Hong Kong Telecommunications reached an agreement to establish a joint venture, aiming to apply for a license from the Hong Kong Monetary Authority to issue a stablecoin pegged to the Hong Kong dollar under the new regulatory regime.
"We are accelerating our preparations and will announce more details in due course," said Dominic Maffei, Standard Chartered Hong Kong's head of digital assets and fintech.
It is worth noting that stablecoins themselves have generated a financial incremental space. On June 5, digital currency giant Circle went public on the New York Stock Exchange, becoming the "first stablecoin stock," opening at $69 per share. As of the close of the U.S. stock market on June 12, Circle's stock price had risen to $106.54 per share, with a total market value of $23.7 billion.
"I believe the development prospects for stablecoins are very promising. Besides Circle, which just went public in the U.S., and stablecoin giant Tether, I believe that companies in China, Europe, South America, and elsewhere will also rush to enter the market, making the future very promising," Deng Jianpeng stated.
Major companies are responding quickly; as mentioned earlier, Ant International and Ant Digital have already taken steps regarding stablecoin licenses.
"In fact, Ant Digital participated in the HKMA's Ensemble regulatory sandbox as early as August last year, mainly promoting RWA (real asset tokenization) projects for physical assets such as new energy charging stations. As the parent company of Alipay, Ant Group's application for a stablecoin license in Hong Kong aims to strengthen its blockchain technology layout and further serve its cross-border payment and treasury management business," said Jeffrey Ding.
From a global competition perspective, "Ant International positions itself against international payment giants like Stripe, PayPal, as well as Visa and MasterCard, all of which have ventured into stablecoin issuance. As one of the first companies to publicly announce plans to apply for a stablecoin issuance license in Hong Kong, Ant International has a significant first-mover advantage due to its strong capital management capabilities and global fintech background," said Jeffrey Ding.
In August 2023, global payment giant PayPal announced the launch of a stablecoin, PayPal USD (PYUSD), pegged to the US dollar, 100% backed by US dollar deposits, short-term US Treasury securities, and similar cash equivalents, issued by the US fintech company Paxos Trust Company.
According to PayPal, customers can convert PYUSD between PayPal and compatible external wallets; use PYUSD for person-to-person payments; select PYUSD to pay fees at checkout; and exchange any cryptocurrency supported by PayPal for PYUSD.
In fact, while competing for first-mover advantage, there are also considerations for asset allocation. "After participating in stablecoin issuance, institutions can acquire fiat currency paid by stablecoin holders at nearly zero cost, and can also use this to purchase some low-risk investment products, such as U.S. Treasury bonds, generating returns. Especially as the issuance volume of stablecoins increases, the base grows, and potential investment returns could be quite considerable," said Deng Jianpeng.
"Currently, there are relatively few laws and regulatory rules regarding stablecoins. The stablecoins that are popular in the market actually face compliance and financial risks," Deng Jianpeng emphasized.
Including the issue of asset stability, as mentioned above, stablecoins will require 100% reserve backing. To what extent can the asset security of stablecoins be guaranteed under this measure?
Jeffrey Ding believes that the 1:1 backing of real assets enhances asset security but cannot completely eliminate risks. High-security assets (such as short-term U.S. Treasury securities, cash, bank deposits) can be quickly liquidated in a short time, greatly reducing liquidity risk. However, if reserves are volatile or low liquidity assets (such as commercial paper, tokenized securities), the risk will significantly increase, which is why both Hong Kong and the U.S. require reserves to be high liquidity assets, including cash and short-term U.S. Treasury bonds.
Jeffrey Ding mentioned that both Hong Kong and the U.S. require reserves to be held by independent, regulated custodians, completely isolated from the issuer's own funds, to prevent user asset losses due to issuer bankruptcy or misappropriation of funds, and subject to third-party accounting audits or on-chain verifiable mechanisms to enhance transparency and public confidence, preventing false endorsements or information asymmetry.
One risk is that if there are problems with the pegged reserve assets, the stablecoin will also face issues. In March 2023, Silicon Valley Bank announced its closure due to a liquidity crisis, and at that time, $3.3 billion of Circle's $40 billion USDC reserves were held at Silicon Valley Bank. This caused the price of USDC to plummet to about $0.87, significantly deviating from its pegged price.
The application layer also faces compliance issues. "In the field of cross-border payments, the advantages of stablecoins are evident. Whether in terms of payment costs or payment efficiency, they outperform traditional financial institutions, but their challenge lies in compliance issues. The issued stablecoins must be strictly linked to the corresponding reserve cash or other equivalents. If this cannot be achieved, it would be equivalent to over-issuing currency or fraud, which could be a significant challenge for future regulations to pay attention to," said Deng Jianpeng.
"Another challenge is anti-money laundering. Stablecoins may be exploited by hackers or used for other illegal purposes, which is also a significant challenge," Deng Jianpeng stated.
It is worth noting that there is a consensus in the industry that high compliance costs are also a major issue that virtual asset participants must overcome.
"Finally, for other countries using non-U.S. dollars or non-mainstream fiat currencies, or for those countries where the credibility of their national fiat currency has collapsed or where inflation is severe, the accessibility of stablecoins is very convenient. There is no need to open a bank account; just internet access is enough. This will lead these countries to sell off their national currencies in exchange for USD stablecoins, posing significant challenges to their financial sovereignty, currency sovereignty, and financial security," emphasized Deng Jianpeng.
