Hong Kong Stablecoin: Exploring the Balance Between Cryptocurrency Decline and the Rise of Digital Renminbi

Hong Kong's Stablecoin Strategy: Pursuing a Balance Between Innovation and Stability in the Post-Crypto Era of Digital Finance

Author: Jeffrey Sze

Translated by: Deep Tide TechFlow

Hong Kong is becoming the stablecoin hub of Asia. Source: Jeffrey Sze.

On August 1, Hong Kong's "Stablecoin Regulation" officially came into 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 batch of stablecoin licenses by early 2027 and has begun reviewing applicants and formulating an operational framework.

This rapid yet cautious advancement signifies a thoughtful attempt by Hong Kong in the digital finance sector, striving to find a balance between innovation and stability to build a new financial order based on trust.

A Purpose-Built Regulatory Experiment

Unlike the U.S. model—where the market often leads regulation—Hong Kong has embedded risk control into the system from the outset.

The framework requires 100% fiat currency reserves, strict audits, a minimum capital requirement of HKD 25 million (approximately USD 3.2 million), and security verification for smart contracts. This aligns more closely with 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, it is expected that only three to four will ultimately be approved. This is understandable: to ensure stability and security, this game is destined for the giants.

HKMA Chief Executive Eddie Yue previously emphasized, "Stablecoins are not investment or speculative tools, but a form of payment application based on blockchain technology, which 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 alleviated 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 auxiliary tools of cryptocurrencies to financial instruments pegged to fiat currencies, gradually integrating into regulated monetary systems and cross-border settlements. Examples like HKDG (a stablecoin pegged to the Hong Kong dollar) and CNHC (an 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 shed their cryptocurrency origins and become a legitimate new form of currency.

The Battlefield of Stablecoins: Competing 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 establish a foothold, the key lies not in elegant design, but in strategic deployment, such as:

HKDG can integrate with Octopus (public transport), e-commerce checkout systems, ticket refunds, and B2B reconciliation.
Offshore RMB stablecoins can support trade flows under the "Belt and Road" initiative, 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 arm, JD Technology, has registered two stablecoin brands in Hong Kong—JCOIN and JOYCOIN—indicating that Chinese companies are clearly signaling their intent to actively enter the Hong Kong dollar and RMB stablecoin markets.

Global Strategy: The On-Chain Battlefield

According to data from CoinGecko, SlickCharts, and the Financial Times, as of August 2025, the global cryptocurrency market capitalization has exceeded USD 4 trillion, roughly equivalent to Japan's GDP, with Bitcoin accounting for over 60%. This is a rapidly developing, liquid, and 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 currencies but will become full participants in on-chain finance. With 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 offshore RMB stablecoin models—indicating growing interest from regulators.

In this context, Hong Kong can serve as both a laboratory and a launchpad.

Hong Kong's Dual Role: Designer and Clearing Center

USD stablecoins enjoy global influence due to America's financial hegemony, but their system has begun to show cracks—from regulatory fragmentation to insufficient reserve transparency. Hong Kong, on the other hand, is betting on a different model: a sovereign-backed, rule-oriented, market-driven digital currency system.

The goal is to bypass the centralization of central bank digital currencies (CBDCs) while avoiding the opacity seen in models like Tether. If successful, Hong Kong could develop 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' participation will be essential for the expansion of the stablecoin ecosystem.

Hong Kong must mobilize local banks—promoting account openings, clearing participation, custody services, and lending operations—to embed the stablecoin architecture into the traditional financial system.

Connecting Bridges, Not Endpoints

Today, stablecoins sit at the intersection of national regulation and Web3 innovation. They are neither fully state-controlled like CBDCs nor completely decentralized like cryptocurrencies, but rather a form of institutionalized middleware—realized and commercialized through technology under policy guidance.

Looking ahead, as e-HKD and e-CNY introduce features like 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, natively on-chain currencies.

From this perspective, stablecoins are not the endgame but rather scaffolding for transition. As sovereign nations gradually embrace a fully digitalized fiat currency system, stablecoins may be replaced by e-HKD, e-CNY, or even a digital dollar.

But for now, they serve as a bridge. Whether this bridge can remain stable and whether it can lead us in a worthwhile direction depends on whether Hong Kong can translate its regulatory ambitions into concrete actions.

Jeffrey Sze is the Chairman of Habsburg Asia (partially owned by the Habsburg family) and 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.

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