Hong Kong is moving forward with plans to license stablecoin issuers, despite continued opposition from Beijing to cryptocurrency activity. The Hong Kong Monetary Authority (HKMA) aims to make decisions on an initial batch of 36 applications by , according to HKMA Chief Executive Eddie Yue, who spoke at a Legislative Council meeting on .
The push for stablecoin regulation in Hong Kong comes after plans were reportedly stalled by Beijing, highlighting the complex dynamic between the city’s ambitions to become a digital asset hub and the mainland’s strict control over financial technology.
Stablecoins, cryptocurrencies designed to maintain a stable value relative to a specific asset like the U.S. Dollar or gold, have gained prominence as a means of reducing price volatility within the crypto market. Hong Kong’s Stablecoins Ordinance, passed in and effective from , requires licensing for entities issuing stablecoins within the territory or pegging them to the Hong Kong Dollar.
According to policy advisory lead Jordan Wain from Chainalysis, stablecoins now account for over half of all value transferred directly on blockchains, making them “central to the crypto ecosystem.” The HKMA has identified potential use cases for stablecoins within Hong Kong, including cross-border payments and tokenized deposit systems for international banks.
Payment Cards Group, a prospective issuer, claims that Hong Kong dollar-backed stablecoins could facilitate faster refunds, quicker cross-border payments, and more transparent foreign exchange rates.
China’s Crypto Concerns
Interest in Hong Kong’s licensing regime has reportedly drawn applications from major Chinese technology firms, including Ant Group, backed by Alibaba, and e-commerce giant JD.com. However, in , Chinese regulators, including the People’s Bank of China (PBoC), advised against the plans, effectively halting progress, according to reports.
While Hong Kong maintains a degree of autonomy under the “one country, two systems” principle, Beijing exerts significant influence over major policy decisions. China has consistently taken a restrictive stance on cryptocurrencies, initially tightening controls in and ultimately imposing a complete ban on crypto transactions in , citing concerns over volatility and illicit activity.
A recent report indicated that stablecoins are frequently used by Chinese organized crime to move illicit funds, with as much as $44 million transferred daily through complex networks. Beyond criminal risks, Beijing’s primary concern centers on maintaining monetary control, according to academic Monique Taylor from the University of Helsinki.
Taylor explained that Beijing is wary of renminbi-linked financial instruments circulating beyond its regulatory reach. “Stablecoins challenge [Beijing’s] state control over money, payments and capital flows, and therefore sit uneasily with China’s state-centered model of monetary governance, which prioritizes oversight and domestic financial stability,” she said.
Beijing is also concerned about the potential for “dollarization of the digital asset economy,” with fiat-backed stablecoins like USDT and USDC pegged to the U.S. Dollar. Concerns exist that such stablecoins could reinforce the U.S. Dollar’s dominance in global finance.
A Cautious Experiment
Hong Kong’s planned licensing regime appears designed as a limited experiment, allowing Beijing to assess the potential of stablecoins while maintaining control, rather than a direct challenge to U.S. Financial influence, according to Taylor. This cautious approach was reinforced on when eight Chinese state regulators issued a joint statement reaffirming China’s ban on crypto activity, including unauthorized issuance of yuan-backed stablecoins.
Wain suggests that Hong Kong’s initial licenses are intended to demonstrate that stablecoins can be effectively supervised while still playing a central role in payments, tokenization, and the city’s broader Web3 ambitions. This regulatory clarity could attract overseas investors interested in Hong Kong’s stablecoin plans, though Taylor notes that a fully liberalized crypto environment remains unlikely.
