Stablecoins bring a second rise curve opportunity to Hong Kong.

Stablecoins are not a short-term speculation concept; they represent a systematic reshaping of the global value circulation framework. If Hong Kong can successfully establish a stablecoin system and find a balance between regulation and industry, it will not only attract a number of international projects but also has the potential to become a haven for new financial innovations.

Written by: Alex Zuo, Senior Vice President of Cobo, Head of Stablecoin Business

In the past few years, we have witnessed stablecoins evolve from an innovative experiment in crypto-native assets to a key component in the global payment system. Stablecoins are no longer just trading tools in exchanges but have begun to undertake broader financial intermediary functions, particularly demonstrating strong efficiency advantages in cross-border settlement scenarios. In this trend, Hong Kong's location, institutional flexibility, and policy window give it the potential to become an important hub for the internationalization of stablecoins in the next phase.

Market Drives Demand Shift

Cobo has observed some new changes in the industry since the end of 2023: an increasing number of cross-border payment companies are proactively reaching out, and their upstream and downstream customers are beginning to express the need to accept stablecoin settlements such as USDT and USDC. This is not a result of regulatory push but a spontaneous demand driven by the market: traditional payment paths are lengthy and costly, and businesses and merchants urgently need a more convenient and neutral medium for value exchange when expanding cooperation overseas.

The cross-border payment potential of stablecoins is not just on paper. Through contact, we have also observed that some e-commerce platforms, logistics service providers and even large Internet companies have also begun to explore embedding stablecoins into their own payment systems. These companies don't necessarily need to issue their own coins, but they are extremely concerned about efficiency improvements in the global payment scenario. Digital wallets are the technical starting point for it all.

Hong Kong's Second Growth Curve

Hong Kong is intensifying the development of a stablecoin regulatory system, clearly introducing a licensing system, emphasizing the safety of reserve assets, the transparency of on-chain transactions, and the embedding of anti-money laundering mechanisms. Globally, this system construction is at the forefront, ensuring financial stability while establishing predictable compliance boundaries for the industry.

The current use of stablecoins in Hong Kong is mainly concentrated on offshore dollar assets like USDT and USDC. Many clients, from traditional payment companies, export e-commerce, and service platforms to emerging Web3 enterprises, have begun to use stablecoins as a settlement method. For them, this is not just "changing a currency," but rather reconstructing their global capital flow and business logic.

Furthermore, the compliant stablecoin that Hong Kong is set to launch in the future, which is anchored to multiple currencies, is expected to reshape Hong Kong's position in the Asia-Pacific payment system. This is an important step for Hong Kong towards becoming the "Asian Clearing Center" of the future.

In the current monetary system, the essence of stablecoins is still a reflection of sovereign currencies. The prosperity of the US dollar stablecoin ecosystem partially stems from the high tolerance of the US financial system towards the market and clear regulatory expectations. In contrast, the path for the renminbi stablecoin is much more complicated.

From a regulatory point of view, Chinese mainland's primary focus on RMB digitization is the digital RMB led by the People's Bank of China, rather than a stablecoin issued by commercial institutions. The competent authorities may have a concern that once the scale of the offshore RMB stablecoin expands and is out of regulation, it may affect the capital flow control and the effectiveness of monetary policy, bringing potential risks. In addition, after all, the size of the offshore RMB market is far from being comparable to the scale of the offshore US dollar, so most institutions are still in a wait-and-see state for the stablecoins pegged to the RMB. Without clearer policy support and the implementation of cross-border payment scenarios, the promotion of RMB stablecoins still faces practical constraints.

However, from the perspective of Hong Kong itself as the largest offshore RMB center, it is expected that there will be future exploration of offshore RMB stablecoins. Recently, Hong Kong's Financial Secretary Paul Chan stated that licensed issuers would be allowed to choose different fiat currency types, which clearly also paves the way for RMB stablecoins. The development of RMB stablecoins is an extension of the internationalization of the RMB and a necessity for the RMB to adapt to new circumstances. By leveraging the technological advantages of RMB stablecoins, there is hope to create a better payment experience in the "Belt and Road" markets and in trade between specific countries and China. However, it can be anticipated that RMB stablecoins are unlikely to pose significant competition to other stablecoins.

Compliance and Trust are Core

The core of stablecoins is not just the issuance of the coin itself, but the establishment of a trusted financial infrastructure around the entire lifecycle of the stablecoin. This includes building secure custodial infrastructure as well as developing on-chain compliance tools, such as the KYT (Know Your Transaction) mechanism, address risk identification, and embedding Travel Rule regulations.

The goal of this system is to help traditional payment companies, Web2 enterprises, and cross-border merchants operate safely and transparently using stablecoins, without being familiar with the inherent risks of blockchain. By making good use of technology, institutional users of stablecoins can establish reasonable approval processes and risk control mechanisms, and even cooperate with regulatory authorities to provide data traceability support when suspicious interactions occur in on-chain transactions. This is a fundamental requirement for stablecoins to truly go mainstream and is the direction that Cobo and many partners are committed to advancing.

Stablecoins are not a short-term speculation concept; they represent a systematic reshaping of the global value circulation framework. If Hong Kong can successfully complete the construction of the stablecoin system and find a balance between regulation and industry, it will not only attract a number of international projects to settle but also has the potential to become a harbor for new financial innovations, and even become the Oriental Pearl of future capital flows in Asia.

For Chinese enterprises going abroad, stablecoins provide a new tool for flexibly managing funds under capital accounts. If the discussion over the past decade has been about cross-border payment platforms, then in the next decade, what we may talk about is a new type of global financial network built on stablecoins and compliant custody.

The starting point of this network is likely in Hong Kong.