Stablecoins spark hope and hype across Hong Kong

Hong Kong gears up to pioneer stablecoin licensing amid global crypto surge

Stability‐driven digital coins are reshaping cross‑border payments, and Hong Kong is poised to become the next Asian crypto hub. The city’s forthcoming licensing framework is part of a broader effort to position itself at the forefront of a market that is already worth more than US$270 billion worldwide.

Why stablecoins matter

• Unlike highly volatile tokens such as bitcoin, stablecoins keep their value tethered to real‑world anchors ― typically the US dollar or a commodity like gold.
• They enable cheap, fast, and low‑cost cross‑border transfers, especially valuable in economies where hard currency is scarce, such as Argentina or Nigeria.
• Investors use them as a safe haven to park profits while avoiding immediate conversion to cash.

Geopolitical stakes

Paul Brody of EY warned that the stablecoin market has grown to a scale where “cash flows have geopolitical implications.” He pointed out that more than 99 percent of stablecoin assets are denominated in US dollars, meaning countries that fall behind could find themselves “frozen out.” The U.S. House of Representatives codified stablecoin use last month, a move that Senator Bill Hagerty said would “ensure the dominance of the US dollar.”

Hong Kong’s pressing aim

Rita Liu, chief executive of RD Technologies, said her company is developing a Hong Kong dollar‑denominated stablecoin under a government‑run trial. She emphasized that “there’s a wave of legitimising the digital asset industry” and that “Hong Kong is trying to be at the forefront.”

Official caution

Hong Kong Monetary Authority head Eddie Yue urged the public to “rein in the euphoria” over the new bill, noting that at most a handful of stablecoin issuer licences would be granted in the initial stage. He warned that the hype could inflate company stock prices and that some discussions on stablecoins may be overly idealistic, especially around their “potential to disrupt the mainstream financial system.” Lily King of crypto company Cobo echoed that stablecoin news often drives market sentiment.

Broader regulatory context

Japan, Singapore, and South Korea are already regulating stablecoins, while Hong Kong is hoping to secure a first‑mover advantage. Jonas Goltermann of Capital Economics cautioned that stablecoins are not risk‑free: they can deviate from their pegged value due to market fluctuations, technical glitches, or problems with the underlying assets.

What could happen next?

Goltermann suggested that stablecoins might become a niche product if banks develop their own programmable money. He added that Hong Kong’s stance is largely political, “not only about technology,” but that stablecoins “can still help” even if they are not a silver bullet.

Bottom line

With a $270 billion global market, stablecoins are poised to reshape finance. Hong Kong’s licensing move may unlock new opportunities, but regulators and investors must remain wary of the hype and the inherent risks in a rapidly evolving space.