The reconstruction of geopolitical order + the compliance of virtual assets is undoubtedly one of the significant changes of the 21st century for Hong Kong.
Written by: Farmer Frank
Dubai gold began to show a rare "negative premium" last week.
According to reports from Bloomberg citing sources, many Dubai gold traders are selling off their stocks at a wholesale price of $30 below the London benchmark price, due to the ongoing impact of Middle Eastern conflicts, as they cannot ensure timely delivery and want to avoid indefinitely bearing storage and financing costs.
Although this "negative premium" on gold is mainly concentrated at the wholesale level and has not yet affected retail gold prices, such a situation rarely occurs in a normal market, as gold has always been regarded as one of the most liquid physical assets globally. Theoretically, any obvious price gap would rapidly attract arbitrage capital to transport it to higher-priced markets to eliminate all price discrepancies.
Yet this time, the arbitrage channel has been abruptly cut off by the realities of the world.
This is reminiscent of the "negative oil prices" that occurred in the oil market in 2020, with the underlying logic being similar: When the delivery of physical assets must bear high transportation, insurance, and storage costs while facing enormous uncertainty, a misalignment arises between the "paper price" and "real value."
In other words, gold is just one facet; the underlying issue is that the entire asset flow channel has encountered problems, which also implies that Dubai, as a global offshore financial center, is facing a functional stress test.
1. The flames of war reach Dubai, a sober reflection on the "offshore financial center."
Here's a little-known fact: Dubai is not only the "safe haven" for global wealth but also one of the most important re-export trade hubs in the global gold market.
According to customs and trade data, Dubai imported 1,392 tons of gold in 2024, with a total value exceeding $100 billion, while its export scale reached as high as $74 billion, making the UAE the second-largest gold import-export center globally. For instance, gold mined in Africa and refined in the UAE, as well as gold transiting from Switzerland and London to Asia, must pass through Dubai.
Notably, if we look at the historical curve of Dubai’s gold trade volume, we will find that 2022 was a particularly significant turning point. During this period, the outbreak of the Russia-Ukraine conflict accelerated the import and export scale of gold in Dubai sharply, as a large amount of capital and physical assets that originally flowed through the European system rerouted through Dubai to find new paths amid sanctions, compliance, and geopolitical divisions.
This actually reflects the logic of Dubai’s rise: others’ crisis is precisely its opportunity window.
As a trade hub connecting Asia, Europe, and Africa, Dubai has attracted wealth from around the world over the past twenty years, thanks to free capital flow, low tax rates, and a relatively stable political and business environment—from Russian oligarchs to global family offices to Middle Eastern oil capital—all consider it an important node for asset storage, settlement, and circulation. More critically, with each external geopolitical turmoil, Dubai often emerges as a beneficiary.
However, unexpected this time, the wind has blown towards Dubai itself.
Source: Bloomberg
The essence of "finance" is the flow of funds, and the premise of flow is that assets can be transferred efficiently and safely.
Therefore, when physical circulation channels are blocked, the impact will not only be felt in the gold market; all physical and financial assets reliant on cross-border movement will face the same plight, and this raises a more fundamental question—what is the first principle of an offshore financial center?
The answer is quite simple: safety.
Not tax rates, not convenience of registration, not loose regulations—these are all secondary competitive factors. The primary reason funds are willing to stay in a financial center is the simplest issue: can your money be withdrawn at any moment? Can it be safely transferred when needed?
If this underlying assumption cracks, the entire value system will start to loosen. The inability to move gold is merely the first visible sign of a crack in such "certainty."
Historically, the status of offshore financial centers has never been firmly established just by a plaque labeled "International Financial Center;" it is a result repeatedly validated and chosen through one crisis after another. Each significant geopolitical shock effectively functions as a hidden "re-tender," where capital reassesses where is safer, where "certainty" is more trustworthy, and then irreversibly shifts chips in that direction.
Such migrations have occurred more than once in history.
Beirut was once the financial center of the Middle East until war destroyed it; Hong Kong had experienced a wave of capital outflow before 1997 but later rebuilt trust due to institutional stability. The rise and fall of offshore financial centers have never been a slow linear process; they often appear calm for a long time, only to shift focus at an unexpected speed after a certain critical point.
From this perspective, offshore financial centers like Dubai, Singapore, the Cayman Islands, and Switzerland actually thrive on a common historical backdrop of "peaceful globalization." They often lack large domestic industrial systems and military power sufficient to support financial hegemony; their financial status largely stems from the stability of the global order. In a sense, they have benefitted from the "peace dividend" nestled within great power competition.
However, as the world shifts from "peaceful globalization" to a new model characterized by "great power competition, rule restructuring, and geopolitical priority," the risk premium of these financial nodes will inevitably be repriced.
As revealed by the current Middle Eastern conflict, a city that relies heavily on continuous external supplies of food, water, energy, and even financial settlement chains, once its external channels are systematically cut off, its vulnerabilities will be magnified manifold.
There is never a true neutrality detached from power structures. Offshore must ultimately rely on a greater order and a stronger security endorsement.
When this logic is re-understood, the paths of capital risk aversion will also change accordingly, raising the question: if cracks appear in Dubai, where will the next station be?
2. Dubai falls, who is qualified to feast?
Theoretically, the options are not plentiful.
Retracing to Europe and America?
Not necessarily realistic, as a large amount of capital initially flowed out from Russia, Europe, and the United States precisely to evade sanction risks, political risks, and stronger regulatory pressures, choosing to settle in Dubai; "retracing" merely reintegrates it within the risk structures they initially sought to avoid.
Turning to Singapore?
On the surface, it makes sense, as Singapore has always been Dubai's most direct competitor, but this also means it is somewhat the "Southeast Asian version of Dubai," with a smaller scale, lacking strategic depth, and a high level of external dependency, all while remaining within the strike range of the U.S. political system. Under the compliance pressures from the FATF, the thresholds and scrutiny requirements for opening accounts have tightened in recent years. For some highly sensitive and strongly cross-border attributes of funds, while Singapore is not unattractive, it may not be able to accommodate all spillover demand.
It is against this backdrop that Hong Kong is starting to reappear in more dialogues. Friends from licensed virtual asset institutions in Hong Kong have reported a visibly increasing volume of business inquiries from the Middle East and related regions, which mainly do not come from retail traders but rather from family offices, cross-border trade settlement platforms, foreign trade companies, and other institutional entities.
Hong Kong is quietly absorbing the risk aversion capital overflow from the Middle East conflict.
Structurally, Hong Kong indeed possesses a set of very unique "composite advantages" within the current international market landscape, serving as a free port of financial capital while also having a well-established financial governance and regulation system.
The first card is the institutional foundation of a free port for capital: Hong Kong maintains a peg between the Hong Kong dollar and the US dollar, with a high degree of freedom for funds to enter and exit. More critically, compared to some offshore nodes that purely depend on a globalized environment, Hong Kong rests behind a large economy and mature financial system, possessing stronger institutional continuity and safety expectations;
The second card is the highly mature currency governance system and linked exchange rate system: For global funds, the US dollar remains the core unit of exchange and valuation. Whether for corporate settlement, trade financing, or foreign exchange transactions, Hong Kong adopts a linked exchange rate system between the US dollar and Hong Kong dollar and has a mature US dollar liquidity infrastructure, which determines its natural advantages when absorbing cross-border funds today;
Additionally, this round of opportunity for Hong Kong holds a deeper layer of logic—a logic that aligns with the intriguing aspect of the Dubai gold discount event.
As mentioned above, the fundamental reason Dubai gold has to be sold at a discount is not that gold has lost value; rather, it is because the transfer of physical assets highly depends on physical world channels—flights, ports, insurance, and storage. If any one of these conditions encounters issues, even the most standardized and "hard currency" assets can instantly lose liquidity.
So, is there an asset that can achieve instantaneous transfer in the context of flight cancellations and transport obstacles, ensuring round-the-clock settlements while minimizing traditional logistics and cross-border friction, thereby lowering various capital losses and maximizing cost efficiency?
Yes. Virtual assets on the blockchain, particularly stablecoins.
Stablecoins represented by USDT/USDC can complete cross-border value transfers within minutes, relying neither on logistics nor on storage, and facing almost no border friction. When the review chain of traditional banking systems lengthens due to geopolitical risks, when compliance costs soar, and clearing efficiencies decline—even in extreme situations when chain breakage risks arise—this kind of "de-friction, borderless, 7×24 hours" settlement method shows an almost dimension-reducing advantage.
This is yet another crucial aspect of the core logic behind the current re-evaluation of Hong Kong by Middle Eastern funds.
They may not be looking to speculate on crypto assets per se; rather, they are likely seeking a more efficient and secure alternative for settlement and foreign exchange beyond the traditional banking system. Hong Kong happens to possess one of the clearest, most compliant, and financially connective digital asset markets globally, where many Middle Eastern funds seek precisely such financial nodes that simultaneously offer a stable regulatory environment, US dollar liquidity, and on-chain settlement capabilities.
As the competition among offshore financial centers overlaps with this new variable of virtual assets, the hand Hong Kong holds is becoming increasingly difficult to replicate.
3. Hong Kong × Virtual Assets "Historic Train"
It is no exaggeration to say that since the Hong Kong SAR government issued its virtual asset policy declaration on October 31, 2022, Hong Kong may be ushering in a "rare convergence of favorable timing and geographical advantages," marking a truly historic "train" for Hong Kong.
In the global financial system, Hong Kong has long played an important role in connecting Eastern and Western capital. What it has always excelled at is not merely being a local market, but rather, organizing funds of different systems, currencies, and risk appetites into a calculable, connectable, and cleavable framework to enable their efficient flow.
This ability is equally applicable in the era of crypto finance, even becoming more scarce.
As is well-known, Hong Kong has been continuously building new digital financial infrastructures in the past three years, striving to connect the earlier financial infrastructure ecosystem. This includes locally licensed trading platforms (VATP) represented by OSL HK and Hashkey Exchange, along with their supporting services like custody and tokenization, as well as the deep connection with the traditional financial system, leading to the emergence of several licensed virtual asset service platforms (VASP).
Even more intriguingly, just as the global geopolitical order is being rapidly restructured, Hong Kong’s virtual assets, particularly the regulatory framework for stablecoins, have gradually reached the "last mile" after years of efforts:
Regulatory consultations started in 2022;
A regulatory sandbox test is scheduled for 2024;
On May 21, 2025, the SAR Legislative Council passed the "Stablecoin Bill";
On August 1, 2025, the "Stablecoin Regulations" officially take effect;
By March 2026, the first batch of stablecoin licenses will also be on the verge of being issued;
Looking within the major global financial centers, this is currently one of the most systematic and robust compliant fiat stablecoin regulatory frameworks, ahead of the comprehensive implementation of similar legislation in the United States and many other major economies.
According to previous signals from the Hong Kong Monetary Authority, the first batch of stablecoin issuer licenses is expected to be issued progressively starting from early 2026, with limited initial licenses and high entry barriers as well as ongoing regulatory requirements, matching bank-level standards. Because of this, Hong Kong stablecoin licenses are likely to become one of the most valuable compliance certificates in the global digital finance landscape. On-chain stablecoins have long ceased to be just a niche issue in the crypto-native world; they are accelerating to become new mainstream tools reshaping cross-border payment and global trade settlement infrastructure.
For those cross-border funds flowing into Hong Kong from the Middle East, this emerging stablecoin ecosystem signifies far more than a new investment category; it represents the advent of a new settlement channel that functions at a sovereign compliance level, operates around the clock, and is not constrained by physical borders—especially significant when traditional banking systems lengthen reviews due to geopolitical frictions and even face chain breakage risks.
As previously mentioned, the business inquiries from the Middle East are primarily not about simple retail native cryptocurrency trading but rather about large-scale transactions and cross-border trade settlements between enterprises and institutions.
These demands are also prompting a new role positioning for locally licensed institutions in Hong Kong.
At this stage, in the Hong Kong virtual asset market, the most observable counterpart in terms of connecting institutional and corporate trade settlement needs is OSL Group ( 863.HK ), which owns Hong Kong's first compliant licensed trading platform and has compliant channels and payment and trading networks globally. Before the official implementation of the Hong Kong "Stablecoin Regulations" last year, OSL Group introduced three new products aimed at institutions: the compliant stablecoin management platform StableX, asset tokenization service Tokenworks, and enterprise-level crypto payment solution OSL BizPay. This year, OSL Group also launched a compliant US dollar stablecoin USDGO, which adheres to U.S. federal regulations and can be compliantly distributed in Hong Kong, primarily targeting cross-border e-commerce, large-scale trade, and interactive entertainment sectors.
This clearly goes beyond traditional trading operations, starting to extend towards compliant stablecoin management, asset tokenization, and enterprise-level payment solutions. In a certain sense, it highlights the essence of the issue: this round of competition is not merely about transaction matching capabilities for compliant virtual asset platforms but who can realize and mature into the next-generation infrastructure nodes for cross-border global capital flows.
Conclusion
The more turbulent the world, the more expensive certain assets, certain systems, and certain paths become.
The chain reactions brought about by the Iranian situation are still fermenting; this time, no one knows where the endpoint is, but it is almost certain that some opportunities, once lost, are difficult to reclaim; some paths, once formed, will bring strong inertia.
In the past, discussions about Hong Kong’s virtual asset market often revolved around the narrative framework of being a "compliance model"—in a sense, it is a policy experimental field, a frontier for regulatory exploration, but it has not truly deeply integrated with the underlying logic of global capital movement.
In the earlier stage of Hong Kong's launch of compliant Hong Kong dollar stablecoins, retail demand and scenario expansion on the consumer level are likely to be the primary focus for regulatory bodies and licensed institutions. However, this does not imply that stablecoins compliant with issuance or distribution in Hong Kong cannot seek broader real ground demand and possibilities. This is not something that can be achieved overnight, but sometimes, opportunities come far faster than expected—whether one can seize and achieve breakthroughs depends on who is best prepared.
With the accelerated reconstruction of geopolitical layouts, rapid changes in financial markets, and the formal shaping of stablecoin regulations, the significance carried by licensed virtual asset platforms in Hong Kong is being rewritten. This is not only an opportunity for Hong Kong; to a certain extent, it could also mark a historic moment for Hong Kong and various licensed virtual asset institutions deeply embedding themselves into the global trade cross-border payment and settlement systems.
The objective conditions are already in place, the policy framework is closing, and infrastructure is accelerating to take shape; only one question remains:
Can Hong Kong truly play this card well?
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