Written by: Callan Quinn, Decrypt
Translated by: Jessica, Techub News
As the new stablecoin regulations will take effect in August, Hong Kong is aligning its fintech development with China's push for 'de-dollarization'.
Key points overview
The new regulations will take effect in August, requiring fiat-backed stablecoin issuers operating in Hong Kong to be licensed.
Financial Secretary Paul Chan links stablecoins to 'de-dollarization' and regional trade in local currencies.
Analysts point out that high capital and reserve requirements may deter global issuers such as Circle (USDC) and Tether (USDT).
Hong Kong reaffirms its supportive stance on stablecoins and will implement a new regulatory framework for fiat-backed stablecoins in August. Some view this move as potentially stifling the ambitions of large institutions and challenging the US dollar's dominance in the Asian region.
Last Saturday (June 28, 2025), Hong Kong's Financial Secretary Paul Chan linked the development of stablecoins to the growing demand for 'local currency trade settlement' in the Global South and parts of Asia, rather than relying on the US dollar.
In an official blog post after attending the World Economic Forum 'Summer Davos' in Tianjin and Beijing, Paul Chan wrote: 'Stablecoins provide a more cost-effective alternative to the traditional financial system.' He added, 'They are expected to bring transformation to payments and capital market activities, including cross-border payments.'
These remarks align closely with Beijing's large-scale efforts to internationalize the renminbi and 'de-dollarize'. As the world's largest trading nation since 2017, China's global trade landscape highlights the growing demand for renminbi settlement, and Hong Kong's position as the largest offshore renminbi hub further reinforces this trend.
To consolidate this advantage, Hong Kong will implement new regulations on August 1, establishing a licensing system for fiat-backed stablecoin issuers under the supervision of the Hong Kong Monetary Authority. This law requires licensed entities to strictly adhere to regulations regarding reserve asset management, par redemption, fund segregation, and anti-money laundering controls.
Setting high barriers
Only licensed entities can issue or promote stablecoins to retail investors. Although this system opens doors for multi-currency issuance by providing a more globalized framework than some jurisdictions, analysts believe the new regulations set extremely high barriers.
Sean Lee, co-founder of the digital asset technology company IDA, which focuses on developing regulated stablecoin infrastructure, told Decrypt: 'Its capital requirements are about three times those in Singapore.' He described the policy as progressive but more likely to attract local participants rather than global giants like Circle or Tether.
Lee added that the mandatory requirement to establish reserves and operational entities in Hong Kong makes it highly unlikely for large global companies to issue stablecoins directly. Instead, he expects offshore stablecoins to continue to be used in specialized fields through distribution partners.
The application in the retail sector seems limited, especially under Hong Kong's mature local digital payment system. However, cross-border commercial use still has potential. 'Never underestimate the dimension of offshore renminbi; this is the main reason why Hong Kong's new regulations have received full support from Beijing,' Lee mentioned regarding offshore renminbi transactions outside mainland China.
However, despite theoretically reducing costs, the use of stablecoins may not yet surpass existing options. 'When accounting for all costs, the current end-to-end fees may not be more favorable than those of established institutions like Wise,' Lee pointed out the issue of insufficient liquidity in different currencies.
Jack Zhang, CEO of the fintech startup Airwallex valued at $6.2 billion, expressed a more pessimistic view on social platform X: "I don't see any way for stablecoins to lower costs—converting stablecoins to the recipient's currency is far more expensive than the interbank forex market."
However, Lee remains optimistic: 'Given time, the transactional costs based on stablecoins (including foreign exchange) will become lower and lower.'
