This weekend, the "Stablecoin Regulation" officially became law in Hong Kong, so during the holiday, the digital currency sector of Hong Kong stocks continued to surge. However, domestic digital currencies and those outside the wall are completely different matters; it is merely a case of sentiment-driven speculation.

To briefly explain what stablecoins are, taking USDT, which has the largest market share, as an example, its current scale is 152.7 billion, issued by Tether. The Tether company is headquartered in El Salvador, so neither the US nor the EU can regulate it. If an institution holds 1 billion USD in cash, it previously could not directly buy Bitcoin because cash does not circulate on the public chain. They need to first pay this 1 billion USD to Tether to exchange it for 1 billion USDT, and then use USDT to purchase Bitcoin on the public chain. As for Tether, they can take this 1 billion USD to buy US Treasury bonds, earning 5% interest annually, which amounts to 50 million USD. When the institution wants to exit, they can return USDT to Tether and redeem it for cash in USD at a 1:1 ratio. This is the operating principle of stablecoins. Besides Tether's USDT, Circle's USDC also has a significant scale, amounting to 61.5 billion.

Over time, the US government felt something was amiss; these hundreds of billions of on-chain USD needed regulation. Thus, this stablecoin bill was introduced, requiring these companies to apply for licenses in the US, comply with regulations, and have transparent asset reserves audited. In case of any illegal activities identified by the US government, they must cooperate with law enforcement (freezing assets).

This is the recently issued "Stablecoin Bill"; the Hong Kong version is largely similar, simply replacing the US government with the Hong Kong government, and the threshold for applying for a license is a paid-up capital of 25 million HKD.