Author: Jeffrey Sze
Compiled by: Deep Tide TechFlow
Hong Kong is becoming the stablecoin center of Asia. Source: Jeffrey Sze.
On August 1, Hong Kong's Stablecoin Regulation officially took effect, marking Hong Kong as the first jurisdiction in Asia to implement comprehensive regulation and licensing for stablecoins.
The Hong Kong Monetary Authority (HKMA) announced that it expects to issue the first stablecoin licenses by early 2027 and has begun reviewing applicants and formulating an operational framework.
This rapid and prudent advancement marks a thoughtful attempt by Hong Kong in the digital finance sector, aiming to find a balance between innovation and stability to construct a new financial order based on trust.
Purpose-built regulatory experiment
Unlike the American model - where the market often leads regulation, Hong Kong has embedded risk control in its system from the start.
The framework requires a 100% fiat currency reserve, strict audits, a minimum capital requirement of 25 million HKD (approximately 3.2 million USD), and security verification for smart contracts. This brings it closer to the spirit of Singapore's Payment Services Act or the EU's Markets in Crypto-Assets Regulation (MiCA), but with a bolder vision: to become a clearing center based on stablecoin settlements.
Currently, only applicants meeting strict criteria are eligible to apply for stablecoin licenses. Among the many interested institutions, only three to four are expected to be approved in the end. This is understandable: to ensure stability and security, this game is destined for the giants.
The President of the Hong Kong Monetary Authority, Yu Weiwen, previously emphasized that 'stablecoins are not investment or speculative tools, but a form of payment application based on blockchain technology, which itself does not possess the potential for capital appreciation.'
Stablecoins and cryptocurrencies: from power coupling to conscious decoupling
Initially, stablecoins were indispensable partners in the cryptocurrency ecosystem.
They mitigate volatility, allowing exchanges and decentralized finance (DeFi) protocols to operate on a stable price basis. However, this relationship is changing. With regulatory intervention and financial sovereignty becoming focal points, stablecoins are being redefined as independent financial instruments.
The role of stablecoins is shifting from being ancillary tools for cryptocurrencies to financial instruments pegged to fiat currencies, gradually integrating into the regulated monetary system and cross-border settlements. Examples like HKDG (stablecoin pegged to HKD) and CNHC (offshore RMB stablecoin) highlight this evolution at the intersection of policy intent and financial engineering.
The logic is simple: only by operating under sovereign regulation and serving real economic scenarios can stablecoins break free from their cryptocurrency origins and become a legitimate new form of currency.
Digital payment terminals supporting Octopus and mobile stablecoin applications. Source: Jeffrey Sze, © 2025.
The battlefield for stablecoins: competition for application scenarios beyond technology
Today, USD stablecoins account for over 90% of the global market share, not because of superior technology, but due to their entrenched position in global trade, on-chain finance, and price benchmarks. If the Hong Kong dollar or offshore RMB wants to gain a foothold, the key is not in exquisite design, but in strategic deployment, such as:
HKDG can be integrated with Octopus (public transport), e-commerce checkout systems, ticket refunds, and B2B reconciliation.
Offshore RMB stablecoins can support trade flows along the 'Belt and Road', energy payments, or remittances in Southeast Asia.
Real-world asset (RWA) platforms can combine with HKD/RMB stablecoins to provide custody services and liquidity pools.
Notably, JD Group's fintech department, JD Technology, has registered two stablecoin brands in Hong Kong - JCOIN and JOYCOIN, marking a clear intention from Chinese enterprises to actively enter the Hong Kong dollar and RMB stablecoin market.
Global strategy: on-chain battlefield
According to data from CoinGecko, SlickCharts, and the Financial Times, as of August 2025, the global cryptocurrency market capitalization has exceeded 4 trillion USD, roughly equivalent to Japan's GDP, with Bitcoin accounting for over 60%. This is a fast-evolving, liquid, high-frequency trading ecosystem.
If HKD and RMB stablecoins can successfully enter this field, they will no longer be seen merely as wrappers for fiat currency, but become full participants in on-chain finance. Combining Asia's time zone advantages, Hong Kong's real-world asset (RWA) issuance platforms, and compliant Web3 exchanges, Hong Kong is poised to create a liquidity node independent of the dollar's dominance.
In July 2025, the Shanghai State-owned Assets Supervision and Administration Commission began researching stablecoin and digital currency policies. Large tech companies like JD and Ant Group have started actively lobbying Beijing to explore the offshore RMB stablecoin model - indicating growing interest from regulators.
In such a context, Hong Kong can serve as both a laboratory and a launch pad.
Hong Kong Central Business District, a critical node in Asian financial infrastructure. Source: Jeffrey Sze, © 2025.
Hong Kong's dual role: designer and clearing center
USD stablecoins enjoy global influence due to the financial hegemony of the United States, but their system has shown cracks - from regulatory fragmentation to insufficient reserve transparency. Hong Kong bets on an alternative model: a sovereignty-backed, rules-oriented, market-driven digital currency system.
The goal is to bypass the centralization of central bank digital currencies (CBDCs) while avoiding the opacity associated with Tether. If successful, Hong Kong is expected to evolve into a global registration center for stablecoins, a digital asset issuer, and a politically neutral hub for cross-border payments.
Until recently, banks viewed blockchain-related matters as 'high-risk waste.' However, under the new regulatory framework, traditional banks' involvement will be crucial for the stability coin ecosystem to expand.
Hong Kong must leverage local banks' strengths - promoting account openings, clearing participation, custody services, and loan operations to embed the stablecoin architecture within the traditional financial system.
'Belt and Road' cross-border container trade - potential applications of the RMB stablecoin. Source: Jeffrey Sze, © 2025.
Connecting bridges, not endpoints
Today, stablecoins stand at the intersection of national regulation and Web3 innovation. They are neither fully under state control like CBDCs nor completely decentralized like cryptocurrencies, but a form of institutionalized middleware - realized and commercialized through technology under policy guidance.
Looking to the future, with the rollout of e-HKD and e-CNY featuring smart contracts, cross-chain interoperability, and programmable taxation, they may inherit the most practical characteristics of the crypto world. We may soon witness the birth of the first generation of sovereign-approved currencies that are natively on-chain.
From this perspective, stablecoins are not the endgame, but rather scaffolding for transition. As sovereign nations gradually embrace fully digital fiat monetary systems, stablecoins may be replaced by e-HKD, e-CNY, or even digital dollars.
But currently, they are like a bridge. Whether this bridge can be stable and lead us in a worthwhile direction depends on whether Hong Kong can translate its regulatory ambitions into tangible actions.
Jeffrey Sze is the chairman of Habsburg Asia (partially owned by the Habsburg family) and is also a general partner of Archduke United LPF and Asia Empower LPF. He focuses on high-end art trading and real-world asset tokenization (RWA-T) business. In 2017, he obtained a cryptocurrency exchange license in Switzerland.
