The rise of stablecoins continues to shape the cryptocurrency landscape, with renewed regulatory focus from authorities in Hong Kong and the United States. As bitcoin hits new all-time highs, these fiat-pegged digital tokens are drawing attention for their growing role in global finance.
Stablecoins are designed to maintain a fixed value by being pegged to a reference asset, usually a fiat currency like the US dollar. To support this peg, issuers hold reserve assets such as US Treasury bills, ensuring a 1:1 value match between the stablecoins in circulation and the reserves held. These digital assets have become a favored tool among cryptocurrency traders, who use them to protect against market volatility or to shift capital across platforms without returning to traditional currencies.
Beyond trading, stablecoins are being increasingly adopted for cross-border payments and remittances, especially in regions with limited access to traditional banking infrastructure. Leading the market are USDT by Tether, with a market cap of US$152 billion, and USDC by Circle, valued at over US$61 billion. Together, these two stablecoins represent more than 80% of the global market.
In Hong Kong, regulators have moved to introduce a licensing regime aimed at overseeing stablecoin issuers. A new law passed this week requires all issuers to obtain licenses from the Hong Kong Monetary Authority (HKMA) and comply with stringent guidelines regarding reserves and operational practices. The move reflects the city’s broader ambition to become a global hub for virtual assets, a goal announced in 2022 to modernize its financial infrastructure and attract fintech innovation.
The HKMA has already welcomed several firms into a sandbox program for stablecoin trials, including JD.com’s Jingdong Coinlink, RD InnoTech, and a joint venture involving Standard Chartered, Animoca Brands, and Hong Kong Telecommunications. These efforts aim to develop reliable, global-scale payment infrastructure using blockchain technology.
While Hong Kong encourages innovation, mainland China remains firm in its stance against cryptocurrencies. Experts have begun expressing concern over the risk of falling behind, especially as the US embraces digital assets more openly. A recent opinion piece by Zhang Ming of the Chinese Academy of Social Sciences suggests that China should consider developing yuan-pegged stablecoins to enhance the renminbi’s global standing and counterbalance the growing influence of US dollar-backed digital assets.
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