While the rest of the world rushes headlong into crypto experimentation, Hong Kong has taken a different route – less Silicon Valley, more central bank.
Its licensing regime for stablecoin issuers, which took effect in 2024, isn’t designed to foster hype or speed. Instead, it’s a filter: fully backed reserves, high liquidity, zero tolerance for algorithmic or partially collateralized models.
In short – no Terra, no Tether, no nonsense. This isn’t reluctance. It’s design. A financial ecosystem still healing from trust erosion, Hong Kong is playing the long game.
Hong Kong Monetary Authority CEO Eddie Yue made it plain: Participating in the sandbox doesn’t guarantee a license. The message to global fintechs is sharp: Test freely, but you’ll only graduate if you prove resilient. Stability isn’t an aspiration – it’s a requirement.
The framework echoes traditional banking safeguards, translated into a digital idiom. If crypto wants to grow up, it’ll have to wear a suit – and in Hong Kong, the tailor is unforgiving.
Timing is strategy
While Western regulators are bogged down in fragmented crypto debates, Hong Kong is executing a calibrated pivot: integrating stablecoin infrastructure with trade platforms such as CargoX and the Commercial Data Interchange (CDI). This isn’t just about currency – it’s about programmable logistics.
By aligning stablecoins with trade digitization, Hong Kong is quietly writing the playbook for how digital assets can be embedded in global commerce – not as speculation, but as infrastructure.
China connection: close, not cloned
“The global expansion of US dollar stablecoins is posing fresh challenges to yuan internationalization,” said Wang Yongli, a former Bank of China vice president who is now co-chairman of Digital China Information Service Group. “It would be a strategic risk if cross-border yuan payment is not as efficient as dollar stablecoins.”
Hong Kong’s model walks a tightrope between proximity and autonomy. It does not allow stablecoins to peg to the RMB unless explicitly authorized, preserving China’s monetary sovereignty while creating a sandbox-with-bounds.
This makes Hong Kong an ideal buffer zone for digital currency innovation – close enough to Beijing to remain aligned, yet distinct enough to pilot what the Mainland cannot.
The success of Hong Kong’s stablecoin framework undoubtedly can serve as a practical reference and valuable experience for a future RMB stablecoin, contributing to a strategic deployment aimed at enhancing cross-border payment efficiency.
When the IMF nods silently
The IMF recently praised key pillars such as strong reserve management and redemption guarantees – without naming names. But the subtext is clear: Hong Kong’s architecture checks the boxes. Should a Basel-like global standard emerge for stablecoins, Hong Kong might already be the reference draft.
Innovation vs. caution: the inevitable trade-off
The greatest risk? That the same walls built to guard against collapse may also keep out genuine innovators. Startups might balk at licensing thresholds, leaving the field to banks and legacy players – hardly the vanguard of Web3. Yet Hong Kong appears willing to accept this. It would rather miss the next Tether than host the next Terra.
A fortress, not a playground
This city is building a regulatory citadel. It isn’t chasing unicorns – it’s engineering longevity. In an industry plagued by whiplash regulation and overnight implosions, Hong Kong’s sober, measured, almost boring approach may become its greatest competitive edge.
Because, when the music stops, the city with a seatbelt – and not just a seat – will be the one still standing.
Jeffrey Sze is chairman of Habsburg Asia (partially owned by the Habsburg family) and general partner of both Archduke United Limited Partnership Fund and Asia Empower LPF. He specializes in high-end art transactions and in real-world asset tokenization transactions using blockchain technology. In 2017, hw secured a cryptocurrency exchange license in Switzerland.
