Hong Kong stablecoins: Exploring the balance between cryptocurrency recession and the rise of digital RMB

Author: Jeffrey Sze

Compiled by: Shenchao TechFlow

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

On August 1, the Hong Kong Stablecoin Regulations 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) has announced that it expects to issue the first batch of stablecoin licenses in early 2027 and has begun reviewing applicants and developing an operational framework.

This rapid and prudent advancement marks a thoughtful attempt by Hong Kong in the field of digital finance, striving to find a balance between innovation and stability to build a new financial order based on trust.

Specially built regulatory experiment

Unlike the US model - where the market often leads regulation, Hong Kong has embedded risk control into its system from the very beginning.

The framework requires a 100% fiat currency reserve, strict audits, a minimum capital requirement of HKD 25 million (approximately USD 3.2 million), and security verification of 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 the vision is bolder: to become a clearing center based on stablecoin settlements.

Currently, only applicants who meet strict criteria are eligible to apply for a stablecoin license. Among the many interested institutions, it is expected that only three to four will ultimately be approved. This is not difficult to understand: to ensure stability and security, this game is destined to belong to the giants.

The President of the Hong Kong Monetary Authority, Yu Weiman, previously emphasized that "stablecoins are not investment or speculative tools, but a form of payment application based on blockchain technology, and they do not possess the potential for capital appreciation."

Stablecoins and Cryptocurrencies: From Power Coupling to Conscious Decoupling

Initially, stablecoins were an indispensable partner in the cryptocurrency ecosystem.

They have mitigated 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 the focus, stablecoins are being redefined as independent financial instruments.

The role of stablecoins is shifting from being auxiliary tools for cryptocurrencies to becoming financial instruments linked to fiat currencies, gradually integrating into regulated monetary systems and cross-border settlements. Examples such as HKDG (a stablecoin pegged to the Hong Kong Dollar) and CNHC (an offshore Renminbi 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. Image source: Jeffrey Sze, copyright 2025.

The Battlefield of Stablecoins: Competing 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 renminbi wants to establish a foothold, the key is not in exquisite design, but in strategic deployment, for example:

HKDG can be integrated with Octopus (public transport), e-commerce checkout systems, ticket refunds, and B2B reconciliation.

Offshore renminbi stablecoins can support trade flows for the "Belt and Road" initiative, energy payments, or remittances in Southeast Asia.

Real-world assets (RWA) platform can combine with HKD/CNY stablecoins to provide custody services and liquidity pools.

It is worth noting that JD Group's fintech division, JD Technology, has registered two stablecoin brands in Hong Kong – JCOIN and JOYCOIN, marking a clear indication that Chinese companies are actively entering the Hong Kong dollar and Renminbi stablecoin sectors.

Global Strategy: On-Chain Battlefield

According to data from CoinGecko, SlickCharts, and the Financial Times, by August 2025, the global cryptocurrency market capitalization has exceeded $4 trillion, roughly equivalent to Japan's GDP, with Bitcoin accounting for more than 60%. This is a rapidly developing, liquid, and high-frequency trading ecosystem.

If the Hong Kong dollar and the renminbi stablecoins can successfully enter this field, they will no longer be seen merely as wrappers for fiat currency, but will become full participants in on-chain finance. With the time zone advantages of Asia, Hong Kong's real-world asset (RWA) issuance platforms, and compliant Web3 exchanges, Hong Kong is expected to create a liquidity node independent of the dollar's dominance.

In July 2025, the Shanghai Municipal State-owned Assets Supervision and Administration Commission began researching stablecoin and digital currency policies. Large tech companies like JD.com and Ant Group have started actively lobbying Beijing to explore offshore RMB stablecoin models—indicating an increasing interest from regulators.

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

Hong Kong Central Business District, a key node of Asia's financial infrastructure. Image source: Jeffrey Sze, copyright 2025.

Hong Kong's dual role: Designer and clearing center

The US dollar stablecoin enjoys global influence due to America's financial hegemony, but its system has shown cracks—from regulatory fragmentation to insufficient reserve transparency. Hong Kong, on the other hand, is betting on another model: a sovereign-backed, rule-oriented, market-driven digital currency system.

The goal is to circumvent the centralization of central bank digital currencies (CBDCs) while avoiding the opacity similar to Tether. If successful, Hong Kong is expected to develop into a global stablecoin registration center, a digital asset issuer, and a politically neutral hub for cross-border payments.

Until recently, banks regarded blockchain-related matters as "high-risk waste." However, under the new regulatory framework, the participation of traditional banks will be essential for the expansion of the stablecoin ecosystem.

Hong Kong must leverage the power of local banks — promoting account opening, clearing participation, custody services, and lending activities, integrating the stablecoin framework into the traditional financial system.

"Belt and Road" Cross-Border Container Trade - The Potential Application of Renminbi Stablecoins. Source: Jeffrey Sze, Copyright 2025.

Connect bridges, not endpoints.

Stablecoins are now at the intersection of national regulation and Web3 innovation. They are neither fully state-controlled like central bank digital currencies (CBDCs) nor completely decentralized like cryptocurrencies, but rather serve as institutional middleware—operating commercially through technology under policy guidance.

Looking ahead, with the launch of e-HKD and e-CNY incorporating features such as 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 native to the blockchain.

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

But for now, they are like a bridge. Whether this bridge can be stable, and whether it can lead us in a direction worth moving towards, depends on whether Hong Kong can translate its regulatory ambitions into concrete actions.

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