The Hong Kong stablecoin market is heating up: Several state-owned enterprises are eager to head south to apply for licenses.

Author: Xie Zhaoqing, Source: Tencent News "Qianwang"

Hong Kong, which has become lively due to the capital market returning to the global top spot, has been further ignited by stablecoins. With the Hong Kong "Stablecoin Regulation" set to take effect on August 1, many institutions and individuals are gearing up and eager to try their hand in this industry.

Whether it's companies involved in cross-border trade, traditional Hong Kong securities firms or fund institutions, or even some ordinary financial professionals—these participants who have the opportunity to enter the stablecoin market have all revealed to Tencent News' "Qianwang": they do not want to miss the opportunity.

Amidst the hustle and bustle, Tencent News' "Periscope" learned that over 50 enterprises or institutions have flocked to Hong Kong's stablecoin regulatory body—the Hong Kong Monetary Authority—during this period. Most of these companies are involved in cross-border trade, including major energy state-owned enterprises and CITIC Group, among others. They hurriedly headed south to meet with the regulatory team of the Hong Kong Monetary Authority to discuss the possibility of applying for a stablecoin license.

As of the time of writing, Tencent News' "Qianwang" has not yet been able to obtain a comment from CITIC Group regarding this news.

However, these influx of people have put Hong Kong's regulatory authorities in a "dilemma"—on one hand, they are pleased to see the crowds supporting the development of stablecoins in Hong Kong, while on the other hand, they face pressure from international financial organizations, which are concerned that the stablecoin business developing in Hong Kong may spiral out of control in areas such as anti-money laundering.

On the afternoon of July 29, the Hong Kong Monetary Authority announced the "Regulatory Guidelines for Licensed Stablecoin Issuers" and the "Guidelines for Combating Money Laundering and Terrorist Financing (Applicable to Licensed Stablecoin Issuers)" to strengthen the regulation regarding stablecoin license applications.

The Deputy Chief Executive of the Hong Kong Monetary Authority, Chan Wai-man, repeatedly emphasized during the communication session after the guidelines were released that the current market enthusiasm for stablecoins is high, and he hopes that market participants will be cautious, as "stability" is beneficial for industry development.

1. State-owned enterprises flock south to apply for stablecoin licenses

Stablecoins are a type of value-pegged digital currency that maintains a relatively stable value by being tied to specific assets (such as fiat currencies, commodities, or a basket of assets). Currently, the main types of stablecoins on the market include fiat-collateralized stablecoins, algorithmic stablecoins, and crypto-collateralized stablecoins.

The stablecoin announced by the Hong Kong government is pegged to fiat currency, specifically a collateralized stablecoin backed 1:1 by fiat currency at face value. However, the government has not restricted the types of fiat currencies that can be pegged, which includes offshore RMB. By being pegged to fiat currency, the stablecoin provides a relatively stable form of cryptocurrency, thereby reducing the volatility associated with traditional cryptocurrencies.

Stablecoins based on blockchain technology are relatively more convenient, efficient, and cost-effective in payments, transactions, and other aspects, making their future prospects promising, especially in applications such as cross-border payments.

Institutions flocking to Hong Kong to explore opportunities in stablecoins mainly focus on the future possibility of the Hong Kong stablecoins being pegged to offshore RMB, including certain energy state-owned enterprises and companies like CITIC Group that are involved in significant cross-border trade. Although Chen Weimin revealed that most institutions currently in discussions prefer to choose currencies with better liquidity, such as the Hong Kong dollar or the US dollar, Tencent News' "Qianwang" has learned that some institutions aiming to apply for licenses still have the ultimate goal of stablecoins pegged to offshore RMB.

However, in the view of the CEO of the Hong Kong Monetary Authority, Yu Weilun, "many are still at the conceptual stage," as he described these institutions that have flocked in on July 23 in a public blog.

Tencent News "Qianwang" has learned that, based on the current stablecoin "sandbox" cases implemented by the Hong Kong Monetary Authority, if one wishes to become a stablecoin issuer, in addition to being familiar with the potential application scenarios of stablecoins in the future, they must also possess strong technical capabilities, especially experience or feasible solutions in anti-money laundering — the latter being the part that the Hong Kong Monetary Authority is currently most concerned about.

The Assistant President of the Monetary Authority, Chen Jinghong, revealed on the afternoon of July 29 that international organizations, including the Bank for International Settlements and the Financial Action Task Force, emphasized the importance of preventing money laundering risks associated with stablecoins.

Yu Weimen specifically emphasized, "The greater focus is on how to prevent stablecoins from being exploited by criminals as tools for money laundering, especially in scenarios involving cross-border use." Tencent News' "Qianwang" learned that three companies in the stablecoin "sandbox," including JD Coin Chain Company, Yuan Coin, and Standard Chartered Bank, are fine-tuning their plans regarding the "anti-money laundering" aspect.

Tencent News "Qianwang" learned that this is because some institutions have approached the Hong Kong Monetary Authority, which has attracted the attention of international financial organizations. The latter has issued a "risk reminder" regarding anti-money laundering regulations in Hong Kong, especially concerning cross-border trade payments involving specific regions or countries, such as Russia. The cross-border operations of these institutions may involve certain special regions and involve offshore RMB payments and settlements.

Stablecoins, as a new type of payment settlement tool, utilize blockchain technology to integrate information flow and funds. This method not only shortens the time and reduces the cost of cross-border payments, but most importantly, stablecoin payments no longer rely on the existing international payment settlement system, Swift.

This is because although stablecoins are pegged to fiat currencies (which are issued by central banks or designated banks), the stages before the issuance of stablecoins are still centralized, directly linking to the existing banking system. Fiat currency is transferred from bank accounts to the custodial accounts of stablecoin issuers at banks. However, after the issuance of stablecoins, all stages move away from the original banking account system, meaning stablecoins enter a peer-to-peer payment and trading system—unrelated to the original banking system.

This means that, in addition to considering the situation of anti-money laundering, there may also be a situation where regions or institutions sanctioned by international financial organizations have previously used stablecoin payment and settlement methods to evade sanctions from international financial organizations. It cannot be ruled out that they may also use the stablecoin pool in Hong Kong.

How to manage anti-money laundering risks in the stablecoin industry? Chen Jinghong told Tencent News' "Qianwang" that there is currently no specific plan, but it is necessary for stablecoin issuers to persuade the Monetary Authority to recognize their capabilities in anti-money laundering, including but not limited to requiring issuers to conduct "KYC" (short for "Know Your Customer," which refers to measures taken to verify customer identity, understand their background and transaction purposes to ensure compliance when establishing business relationships or conducting transactions with customers) for their own customers and potential customers who may use the stablecoins they issue, or to implement preventive measures through technology.

Chen Jinghong added that KYC can be conducted by the issuer themselves or through third-party institutions, or even through self-controlled data within the issuer's ecosystem to prevent issues.

Some industry insiders have revealed that if one wants to exclude certain trading areas or institutions (such as sanctioned countries or institutions) on the chain, it is not entirely unsolvable, for example, by modifying the underlying technology of the contract, which can prevent certain areas or institutions from making payments through stablecoins.

The Hong Kong Monetary Authority is currently facing pressure from certain international financial organizations regarding how to regulate certain special areas or institutions attempting to use Hong Kong's stablecoins for cross-border trade payments and settlements to evade sanctions from international organizations, and there is no clear plan yet.

Chen Jinghong explained to Tencent News' "Deep Dive" that this requires the issuer to conduct account verification for the customer's wallet when subscribing to or redeeming stablecoins, including reviewing the account's past transaction records and the actual controller of the account. However, Chen Jinghong did not directly provide answers regarding the duration of the wallet account review and the specific operations within the scope of transactions.

An industry insider stated that Hong Kong, as an international financial center, has maintained a good level of regulation and has a strong reputation internationally. He believes this is the cornerstone of Hong Kong's finance, which should not be affected by the stablecoin business. However, specifically, how Hong Kong's regulators should intervene to prevent transactions not recognized by international financial organizations from occurring in the Hong Kong stablecoin sector is currently the most important and urgent task for Hong Kong's regulation.

Against this backdrop of potential risk concerns, the Hong Kong Monetary Authority accelerated the introduction of regulatory and anti-money laundering guidelines in the "Stablecoin Regulation" on July 29. In light of the common international regulatory focus, the Hong Kong Monetary Authority will set stricter requirements in anti-money laundering to minimize the risk of stablecoins becoming tools for money laundering, allowing the Hong Kong stablecoin market to develop in an orderly and healthy manner.

2. Offshore Renminbi Stablecoins Open Up Imagination Space

"If the stablecoin business in Hong Kong wants to scale up in the future, it still relies on stablecoins pegged to offshore RMB rather than HKD stablecoins." This is what several frontline practitioners involved in the stablecoin business in Hong Kong told Tencent News' "Observation." They believe that it is not very meaningful for Hong Kong to create USD stablecoins, as the market already has a very large scale of stablecoins pegged to the USD.

The existing regulations in Hong Kong do not specify the categories of fiat currencies that Hong Kong stablecoins can be pegged to. Chan Wai-man stated that the Monetary Authority has no specific requirements regarding the issuer's choice of the currency and scale of issuance.

Public data shows that as of the end of May 2025, the scale of USD-pegged stablecoins USDT and USDC is approximately $250 billion, with USDT (issued by Tether) being the largest at over $150 billion, while USDC (issued by Circle) has a scale of over $68 billion.

The aforementioned industry insiders revealed that although there is demand for the Hong Kong dollar stablecoin, its scale is ultimately too small, and there are not many applicable scenarios. It may be used more in scenarios priced in Hong Kong dollars in Hong Kong, such as certain financial products.

In comparison, there are more use cases for stablecoins in cross-border trade, most of which are denominated in Renminbi. Many existing cross-border trade institutions are already using dollar-pegged stablecoins for payments and settlements—this is also considered by them to be the most promising use case for offshore Renminbi stablecoins.

According to Tencent News' "Qianwang," the Hong Kong Monetary Authority currently has three stablecoin sandbox companies, including JD Coin Chain, Standard Chartered, and Yuan Coin, all of which have listed cross-border payments of stablecoins as one of the scenarios. In addition, a more mature application scenario in the stablecoin industry is RWA(Real World Assets) business—this is also one of the application scenarios for some stablecoin sandbox companies applying for stablecoin licenses in Hong Kong.

RWA refers to the tokenization of real-world assets, particularly those that can generate stable income, such as hotel rentals, photovoltaic power generation, and even stocks, bonds, and commodities, through blockchain technology, enabling them to be traded, managed, and circulated on-chain. In simple terms, RWA is about digitizing real-world assets and utilizing blockchain technology for trading and management. This business effectively assists traditional assets in financing.

At this stage, stablecoins have become a necessity for some cross-border trade users, and their application in cross-border trade is expected to scale even larger.

However, there are indeed some risks associated with the use of offshore renminbi settlement by certain institutions or regions in cross-border trade. Some international financial organizations are concerned that Hong Kong's future offshore renminbi stablecoins may be used by certain countries or institutions to evade SWIFT sanctions.

A head of an institution familiar with stablecoin business and planning to apply for a license in Hong Kong told Tencent News' "Qianwang" that the "divestment plan" can separate the stablecoin pool linked to offshore RMB, that is, Hong Kong will create a separate stablecoin pool linked to offshore RMB, and the Mainland Free Trade Zone will create another one.

In his view, although this seems to be a "risky" idea, it does make some sense. He cited examples such as certain institutions, including PetroChina, which conduct cross-border trade through channels like CIPS (Cross-border Interbank Payment System) and Kunlun Bank—if some offshore RMB were to mix with the offshore RMB stablecoin pool in Hong Kong, it could indeed pose some risks.

"Divide the offshore renminbi pool into two parts according to a certain structure, namely one pool for Hong Kong's offshore renminbi stablecoins and the other for the offshore renminbi pool in the mainland free trade zone." The aforementioned person believes that the separated offshore renminbi stablecoin pool in Hong Kong can meet the requirements of existing international financial organizations. Another technical personnel familiar with the stablecoin business told Tencent News' "Qianwang" that this is indeed technically feasible.

Tencent News "Qianwang" learned that during this period, many free trade zones in the country have been discussing the landing direction of stablecoins to explore possible business models. Public information shows that on July 10, the Shanghai State-owned Assets Supervision and Administration Commission held a central group study meeting to learn about the development trends and response strategies of cryptocurrencies and stablecoins, including exploring the application of blockchain technology in areas such as cross-border trade, supply chain finance, and asset digitization.

In the view of the aforementioned industry insiders, this approach will separate the management of offshore RMB stablecoins into different pools, allowing Hong Kong regulators to issue offshore RMB stablecoins without any "burden."

According to data from the Hong Kong Monetary Authority, as of the end of May, Hong Kong's RMB deposits amounted to 975.6 billion yuan, while the total RMB receipts for cross-border trade settlements in May were 1,123.6 billion yuan - both of which have the potential to become the basic foundation for offshore RMB stablecoins.

However, many industry insiders believe that having a stablecoin pool linked to offshore RMB and managing it separately is indeed a good solution. However, establishing a new "stablecoin pool" in domestic free trade zones, including Shanghai, will face numerous challenges.