Written by: Tuoluo Finance
The stablecoin wind continues to blow.
Here, the stablecoin genius bill was officially legislated by Trump's signature, and there, Hong Kong stablecoins are ushering in the countdown to issuance. On August 1st, the upcoming Hong Kong (Stablecoin Ordinance) will officially take effect. Compared with the huge waves in the currency circle caused by American stablecoins, the ripples in Hong Kong's encrypted field are only considered ripples, but in the stock market, it has rarely shown amazing influence.
Since the Hong Kong stablecoin bill was passed, the Hong Kong stock market's enthusiasm for stablecoins has been unprecedented. The Hong Kong stock stablecoin sector has ushered in a soaring rise. Not only have many stocks doubled, but there are also many 10x bull stocks. Investors are talking about it with great interest, and listed companies are welcoming capital increases. Seemingly a happy situation for everyone, Hong Kong's regulators have new concerns. Recently, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, wrote an article on the official website (Stablecoins for Steady Progress), wanting to cool down the soaring stablecoin market.
However, facing this boiling kettle, it is really difficult to reduce the temperature.
On May 21, the Hong Kong Stablecoin Ordinance Bill was passed for the third reading by the Legislative Council. At that time, because the US stablecoin bill was still under consideration in the Senate, Hong Kong's "running ahead" operation caused heated discussions in the market. In fact, in terms of content, the licensing system, 100% full reserve, HKD 25 million paid-up share capital, anti-money laundering regulations, etc., are no different from the legislation in other mainstream regions, but in terms of public opinion, it is a true reflection of the two extremes of ice and fire for Hong Kong stablecoins.
On the one hand, due to the decline in Hong Kong's influence in the crypto field, coupled with the thunder and rain of many preemptive operations, the crypto market generally holds a relatively pessimistic view, believing that even if Hong Kong continues to consolidate the regulatory foundation and improve regulatory regulations, under limited market demand, it will eventually be just another appendage of US dollar stablecoins, and it is enough to play the remaining heat of some windows.
Although the crypto market does not like it, this news is extremely beneficial in other markets. After the ordinance was passed, major sensitive giants rushed to layout, and traditional media and securities firms competed to report, allowing stablecoins to achieve a real breakthrough. For a time, discussions on the connotation, usage scenarios, and value significance of stablecoins continued to ferment, gradually extending to the debate on the necessity of RMB stablecoins. The trillion-dollar market of stablecoins seems to be on the eve of its outbreak.
This Friday, the Hong Kong Stablecoin Ordinance will officially take effect and the license application will be opened simultaneously. However, one week before the effective date, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority of Hong Kong, poured cold water on stablecoins. In his article (Stablecoins for Steady Progress), he clearly mentioned that stablecoins are being over-conceptualized and are showing a bubble trend. Eddie Yue pointed out that at most a few stablecoin licenses will be issued in the initial stage, hoping that investors will remain calm and think independently when digesting market benefits. At the same time, the HKMA will seek market opinions on the regulatory and anti-money laundering guidelines for implementing the Ordinance, and will set stricter requirements in terms of anti-money laundering to minimize the risk of stablecoins becoming a tool for money laundering.
It can be seen from the above remarks that Hong Kong has expressed concern about the current market situation, and is taking a very cautious attitude towards the approval of stablecoin issuer licenses. As for why the regulatory authorities have to write articles to pour cold water on the market, the reason is also very simple: stablecoins in Hong Kong are a bit too hot.
This overheating is concentrated in the stock market. The bright prospects correspond to the very early stages of development, making stablecoins a very good capital story. Under this story, almost all stocks associated with stablecoins have ushered in rapid growth, and the growth effect is almost immediate.
Guotai Junan International was approved for a securities trading license in June, becoming the first Chinese-funded securities firm to provide a full chain of virtual asset services. On June 25, it soared 198%, with an annual increase of 4.58 times.
On July 7, Golden Ocean Investment issued an announcement stating that the company has signed a strategic cooperation framework memorandum with AnchorX to explore potential cooperation in four areas, including cross-border payment and trade and stablecoin application scenario expansion. On the second day, Golden Ocean Investment surged 533.17% with increased volume.
On July 15, China Sanjiang Media announced that the company has started preparations for applying for a stablecoin license. On July 16, China Sanjiang Media closed up 72.73%, and its cumulative increase since this year has reached 14.95 times.
Just a piece of news can achieve a straight rise, which is enough to show the strong narrative effect of stablecoins. In addition to the newly added institutions in the sector, the original old concept stocks have also collectively taken off. The cumulative increase of OKLink, Yunfeng Financial, Yixin Group, New Huo Technology Holdings, and OSL Group have all exceeded 100% this year. Even the long-criticized A-shares have been shaken, and digital RMB concept stocks such as Hengbao, Forms Syntron, and Chutian Dragon have also ushered in multiple increases.
Against this background, whether it is a "chameleon" enterprise that takes advantage of the hot spots for capital effects, or a financial institution that actually wants to participate in the stablecoin pie, or a strategic giant that reduces settlement costs and builds corporate moats, they all flocked to it. As of now, according to Caixin reports, fifty or sixty companies are interested in applying for Hong Kong stablecoin licenses, including Chinese mainland central enterprises, financial institutions, and Internet giants.
However, application enthusiasm does not represent approval enthusiasm. The Hong Kong Monetary Authority (HKMA) stated that among the applying institutions, most are only at the conceptual stage and lack practical application scenarios. Those with application scenarios lack the technology to issue stablecoins and the experience and ability to control various financial risks. Issuing solely for the sake of issuing is obviously something Hong Kong does not want to see. It is against this background that the HKMA stated that it would only issue single-digit licenses in the initial stage.
At the same time, facing the overheated license application, the Hong Kong Monetary Authority also intends to take initial screening mechanisms. Caixin quoted sources as saying that the license of stablecoin issuers will not be carried out in the way that applicants download the form and submit a written application uniformly, but will be arranged in a similar invitation application system. That is, in the actual operation, the Hong Kong Monetary Authority, which is responsible for regulating the licensing, will communicate with potential stablecoin license applicants in advance to understand whether they meet the basic application qualifications. Only if they obtain basic recognition in the pre-communication will the HKMA issue the application form.
As for who will get the license? From market sentiment, potential issuers who have already participated in the stablecoin sandbox trial seem to have a better chance. As early as July last year, the HKMA launched the stablecoin sandbox test, and institutions such as Jingdong Coin Chain Technology, Yuan Coin Innovation Technology, and the Standard Chartered Consortium (including Standard Chartered, Ant Group, and Hong Kong Telecom) were selected. Now, the sandbox test has entered the second stage. Although the HKMA emphasizes that being selected for the sandbox does not mean that a license will be issued, and sandbox companies also need to apply for a license according to regulations, sandbox participants obviously have more insights into how to meet regulatory requirements, given the application scenarios and risk control foundation tested in advance in the sandbox.
Overall, Hong Kong mainly values three aspects in the license application: first, technical implementation capabilities, whether it has the technical requirements for issuance; second, application scenario needs, which requires practical solutions and implementation scenarios; and third, risk control capabilities, especially to prevent the risk of stablecoin money laundering. Objectively speaking, large enterprises with a broad base of cross-border financial and payment businesses and complete risk control systems have advantages, while the success rate of applications from small and medium-sized enterprises can be described as quite slim, and they are more of a supporting role.
From the current stage, although the HKMA calls for cooling down, it is difficult for the market's FOMO to drop sharply for a while.
First, there is a certain linkage between the development of US stablecoins and Hong Kong. After the Genius Act was passed, the enthusiasm for stablecoins in the United States has not diminished. Circle has repeatedly reached new highs, and many large institutions have also expressed high interest. Coupled with the positive sentiment in the crypto market and the expected interest rate cuts, US stablecoins will usher in a continuous narrative, and this narrative has a transmission effect.
Second, the discussion on Hong Kong stablecoins continues to extend. Initially, the market only discussed the Hong Kong dollar stablecoin itself, but now, more discussions have begun to focus on the necessity of offshore RMB stablecoins. National think tanks such as the National Institution for Finance & Development, local governments such as the Shanghai State-owned Assets Supervision and Administration Commission, major securities firms' consulting institutions, and social organizations have all begun to pay attention to this topic. From the existing point of view, many opinions believe that offshore RMB stablecoins should be piloted in the Hong Kong market, and then explored in domestic offshore markets represented by free trade pilot zones when conditions are mature. Prior to this, the reason for the slow development of Hong Kong Web3 was precisely the blocked channels. If offshore RMB stablecoins are feasible, it will not only give this field more room for imagination and promote the industry's own development, but also have a profound impact on the existing financial system in the long run.
More importantly, for participants, stablecoins are a potentially profitable market and are gradually forming a complete industrial chain. From the perspective of issuers, for retail entities, stablecoins can significantly reduce transaction settlement costs and enhance competitiveness; for payment entities, entering the digital asset market deeply from the media and moving towards global financial infrastructure is also ambitious; even if it is only for adding color to the stock price and obtaining capital narrative, some participants also have the motivation to participate. In the recent concept-driven period, more than 5 groups, including ZhongAn Online, 4Paradigm, Gametech, and Yisou Technology, have announced large-scale equity financing plans, and OSL Group placed more than 101 million shares at a placement price of HKD 14.9 per share, with a financing plan of nearly HKD 2.4 billion. In addition to issuance, virtual asset trading platforms, which are the main carriers of traffic monetization, and custodians, mainly banks, are actively laying out plans to obtain industry dividends through expansion.
Based on the above, the hype surrounding stablecoins will continue in the short term, and the license, as a stepping stone in this compliance competition, will enter a white-hot stage of competition. However, it is worth noting that as an industry in its early stages of development, the scope of the license's radiation, the strength of the radiation effect, and even the feasibility of business needs remain to be investigated. Considering the hard threshold of HKD 25 million and the possible continuous compliance costs exceeding millions of dollars per year, rashly applying would be counterproductive without strong business model support. As written by the HKMA, only a few will go far and steady, and more companies that only want to take advantage of the hype will inevitably return to their original form after being washed by the license.
In this regard, investors who are closely watching stocks may need to be more careful.
