Hong Kong Bets Big on Stablecoins to Secure Crypto Future

April 8, 2025

By Iris Shu Liu

Image Created by Zhi Hu

“Europe sets standards, China masters scale, but Hong Kong connects everything. No other location combines our legal rigor, financial depth, and geopolitical neutrality,” said Jeffrey Tchui, Executive Director of Web3 Harbour.

This statement encapsulates Hong Kong’s ambitious strategy to position itself as a global hub for virtual assets and stablecoins, leveraging its unique position between mainland China’s technological might and global markets. Through a series of regulatory actions and crypto-friendly policies, the city is transforming into what it hopes will be the world’s premier testing ground for stablecoins and innovation for Web3, a decentralized internet paradigm built on blockchain technology, enabling user ownership of data and digital assets through tokenized systems and smart contracts. 

In Dec. 2024, Hong Kong took a significant step forward with the introduction of the Stablecoins Bill to the Legislative Council. The bill establishes a licensing regime for fiat-referenced stablecoin issuers, particularly those pegged to the Hong Kong dollar or actively marketed to the public in Hong Kong. 

The market has responded positively to these regulatory developments. In Feb. 2025, Standard Chartered Bank Hong Kong announced a joint venture with blockchain firm Animoca Brands and Hong Kong Telecom (HKT) to develop and issue a Hong Kong dollar-backed stablecoin. The partnership, which had been participating in the Hong Kong Monetary Authority’s stablecoin issuer sandbox since July 2024, is positioned to be among the first licensed stablecoin issuers under the new regulatory framework. 

Regulatory Framework: Prioritizing Stability with Innovation

At Feb.’s 2025 Future Stablecoin Summit, Joseph Chan, Hong Kong’s Undersecretary for Financial Services and the Treasury, presented the city’s vision. It involves creating a “gold standard” regulatory framework for stablecoins that combines innovation with strict safeguards. Legislators proposed a licensing system in Dec. 2024. It requires issuers of Hong Kong Dollar (HKD)-pegged stablecoins to obtain a license.

“Stablecoins could be widely adopted as payment tools, but if not properly regulated, they can pose risks to monetary stability,” Chan emphasized. The regulations focus on three key areas: 

Stablecoins must be backed by high-quality, liquid assets held in separate accounts to ensure 1:1 redemption always. This measure is crucial for maintaining the value of stablecoins and preventing sudden devaluations. 

Holders should be able to redeem their stablecoins at face value within “reasonable” time frames, without hidden fees. This not only protects investors but also builds trust in the stablecoin system. 

Strict anti-money laundering (AML) protocols, disclosure requirements, and regular audits are in place. These regulations help prevent illegal activities and ensure transparency in the stablecoin market. 

Dr. Rocky Tung, a policy chief at Hong Kong’s Financial Development Council, stated at the summit, “Without a strong stablecoin system, how can we become a Web3 hub?” He pointed to blockchain’s potential to reduce costs in asset tokenization, as demonstrated by last year’s $800 million tokenized green bond issuance, Asia’s first government-backed crypto bond. 

Angela Wong, a senior consultant at QReg Advisory and former Senior Manager of the SFC’s Fintech Unit who worked on Hong Kong’s initial VASP licensing framework, said at the panel on balancing innovation and stability in stablecoin regimes, “I want to add one more key consideration that issuers should look at, which is beyond compliance. It is about competition.” She noted that stablecoin issuers should acknowledge unregulated entities that creatively evade regulations, while also leveraging their regulated status to attract institutional adoption and maintain regulatory agencies’ leadership.

At the same panel, Alexander Feenie, a managing partner at Chavanette Advisors, thought stablecoin issuers need to clearly define the purpose of issuing stablecoins. Additionally, he pointed, “and so they have a proper roadmap scoped what it is they’re trying to do, and then aligning behind that the technical, regulatory, and partnership strategy to enable a successful issuance and adoption.”

To contextualize Hong Kong’s approach, it is instructive to examine global competitors, such as those in Singapore, Switzerland, and Dubai. 

The Monetary Authority of Singapore mandates full reserve backing for stablecoins exceeding Singapore Dollar (SGD) 5 million, requiring assets in G10 currencies or SGD (cash, equivalents, or 3-month government bonds). Issuers must hold SGD 1 million capital, ensure segregated reserves, and undergo audits. The city-state leverages fintech expertise, global connectivity, and business-friendly policies to drive blockchain innovation.

Home to Zug’s “Crypto Valley,” Switzerland hosts 1,100 blockchain startups under a progressive regulatory framework governing ICOs and stablecoins. In 2024, Zurich Cantonal Bank launched Bitcoin/Ethereum trading, blending traditional finance with crypto innovation through clear token classification and investor safeguards.

Dubai’s Virtual Assets Regulatory Authority (VARA) established a crypto licensing regime in 2022, attracting Binance and Bybit. Supported by tax-free policies and strategic global positioning, its DMCC Crypto Centre fosters stablecoin development and Web3 ecosystem growth.

While global competitors adopt varied approaches, Hong Kong’s cross-border strategy uniquely combines regional engineering expertise with regulatory flexibility.

Hong Kong’s Cross-Border Strategy: From Sandbox to Global Connector 

Hong Kong’s role as a “global sandbox” in developing a Web3 ecosystem highlights its unique value, especially through its flexible regulatory framework, which Tchui sees as a key advantage amid the mainland’s lack of a systematic five-year plan. By adapting commercial Web3 models from other regions and leveraging the engineering expertise of mainland China and India, Hong Kong drives innovation. This strategy positions it as a crucial intermediary for testing new technologies in the Greater Bay Area and connecting Middle Eastern and European investments to Asian markets.

While China has banned crypto trading since 2017 to curb speculation and protect investors, it has been steadily developing its blockchain infrastructure, accumulating patents, and advancing the digital yuan. In contrast, Hong Kong has the potential to attract global cryptocurrency players if it effectively manages associated risks. 

In Feb. 2025, Hong Kong made significant strides in virtual currency development. On Feb. 7, Invest Hong Kong approved Ethereum as an asset for investment immigration applications. Ten days later, the Consensus Hong Kong 2025 conference was held at the Hong Kong Convention and Exhibition Centre, the first outside the U.S. Shortly after, the exchange Bullish obtained a license from the Hong Kong Securities and Futures Commission, increasing the number of licensed trading platforms to 10. The Commission then released the “ASPIRe” roadmap, detailing 12 key measures across five main pillars for virtual assets.

These recent developments build on earlier achievements, such as the launch of Asia’s first spot virtual asset ETFs in Apr. 2024 and the introduction of a crypto index series by the Hong Kong Exchanges in Nov. 2024. Besides, the city issued $800 million in tokenized green bonds in 2023-2024, with plans for further expansion. These initiatives are part of a broader movement toward asset tokenization, which Boston Consulting Group estimates could present a $16 trillion opportunity by 2030. 

Dr. Tung envisions Hong Kong as a hub for tokenized real-world assets (RWAs), tangible or financial assets, tokenized on blockchains to enable fractional ownership and streamlined trading from mainland China, including real estate and carbon credits. “With clear regulations, we can attract mainland asset projects here, unlocking liquidity,” he said. 

Additionally, Hong Kong is looking toward the Middle East. As Gulf nations like the UAE and Saudi Arabia diversify their economies away from oil, their sovereign wealth funds are investing billions in digital infrastructure. Tchui believes that Hong Kong’s transparent regulatory environment makes it an ideal entry point for Middle Eastern capital eager to engage in Asia’s Web3 expansion. 

At the summit, experts underscored various risks linked to stablecoins, including the possibility that a collapse could lead to a crisis like the Lehman Brothers’ bankruptcy, which has led regulators to prioritize “stress testing” and real-time reserve monitoring. A stablecoin collapse could trigger contagion through interconnected crypto markets, akin to how mortgage-backed securities fueled the 2008 crash.

Moreover, panelists discussed the security of “smart” stablecoins, with a cybersecurity expert cautioning that efficiency-driven development might create vulnerabilities. In addition, one panelist emphasized the significance of user education, pointing out that stablecoins are human systems, and if users do not trust the redemption rules, the entire model is at risk. 

In fact, the future of Hong Kong’s Web3 landscape hinges on effective implementation. Key tasks include finalizing stablecoin regulations, attracting top talent, and reassuring skeptics that its regulatory sandbox will not devolve into a chaotic “wild west.” With implicit support from mainland China and a regulatory framework described as “just right”—both strict and adaptable—Hong Kong is poised to redefine the global crypto landscape, one stablecoin at a time. 

As Chan stated, “This is not about chasing trends. It’s about building the infrastructure for the future economy.” For Hong Kong, these efforts could usher in a new era as the “Switzerland of Web3.”  

About the Author

Iris Shu Liu is a Master of Journalism student at Hong Kong Baptist University’s International Journalism Programme. She’s also a Hong Kong correspondent for the China-based National Business Daily (每日经济新闻).

This article was edited by Joe Pan, an editor at Blockwind News and Lecturer of Asia’s only accredited Master of Journalism class on “Covering Cryptocurrency and Blockchain” at Hong Kong Baptist University.