Hong Kong Bets Big on Stablecoins Amid Tight Regulations

Crypto exchange shops now welcome customers in shopping malls, while hundreds of ATMs have appeared along the city’s bustling streets.

The city has ambitious plans to tap into the $3.8 trillion digital assets market. New legislation rolled out last month will allow licensed businesses to issue stablecoins — cryptocurrencies pegged to real-world assets like the US dollar. With mainland China maintaining a ban on crypto trading and mining, Hong Kong has become the country’s testing ground. A successful stablecoin ecosystem here could eventually pave the way for an offshore yuan-backed token and broader adoption of the technology.

Experts have hailed the regulation as a first-of-its-kind framework in Asia, putting Hong Kong nearly on par with the US Genius Act, which has already sparked a global stablecoin boom. But the city’s cautious regulatory approach has tempered initial enthusiasm, preventing the kind of breakneck growth seen in the United States.

Some potential issuers have voiced frustration with strict requirements, including maintaining large liquid reserves and conducting rigorous client identity checks for anti–money laundering compliance. These rules raise costs significantly, industry insiders said. Several companies that initially showed strong interest are now taking a wait-and-see approach, preferring to observe how early applicants fare before committing to the licensing process.

The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, has made clear it will set a high bar. It plans to grant licenses to only a “handful” of issuers during the first round of approvals early next year.
Hong Kong first set its sights on digital assets in 2022 with a policy statement on the sector. An update in June reiterated its commitment to becoming a premier global hub for cryptocurrencies and related technologies.
Beyond bolstering its reputation as an international financial center, Hong Kong’s push into stablecoins reflects Beijing’s shifting stance. China’s recent softening of rhetoric highlights its ambition to internationalize the yuan, amid concerns that US dollar–backed stablecoins could further entrench the greenback’s dominance. Yet Beijing’s strict capital controls remain a major barrier to rapid adoption.

Despite these limits, dozens of firms — including Bank of China, e-commerce giant JD.com, and Alibaba affiliate Ant Group — have already expressed interest in applying for stablecoin licenses.

The scale of enthusiasm was clear at last week’s Bitcoin Asia summit in Hong Kong, where more than 17,000 local and international participants gathered to hear industry experts. Exhibition booths featured everything from crypto mining equipment and bitcoin treasury solutions to trading platforms and digital wallets.

Even under restrictions, China remains a crypto heavyweight. With over 78 million crypto owners, it surpasses the US in total users, according to Triple A’s 2023 estimates. It is also one of the world’s largest bitcoin mining hubs, and Chinese citizens hold a significant share of global bitcoin supply — making the country a “bitcoin superpower.”

Globally, the Genius Act has fueled stablecoin expansion beyond US borders, reinforcing the dollar’s reach. To counterbalance this, JD.com and Ant Group have urged China’s central bank to authorize offshore yuan-backed stablecoins in Hong Kong. But experts believe such tokens are unlikely to emerge soon, at least not until Hong Kong dollar–pegged stablecoins prove their viability.

For now, the city’s stablecoin future rests on how the first batch of licenses is implemented and how successfully the tokens are brought into circulation.