May 14, 2025

By Student Reports Cynthia Qian, Iris Shu Liu, Aki Leung and Daniel MO

“I don’t see Hong Kong as a pioneer in adopting new technologies. It’s more of a conservative, ‘me too’ follower, and to my knowledge, it hasn’t led in Web 1, Web 2, or Web 3,” said Derek Kwik, an investor at BraveSoldier Venture Capital, commenting on Hong Kong’s stablecoin regime.

However, the real-world development of stablecoins and Real World Assets (RWA) in Hong Kong seems to be progressing much faster than this investor anticipated.

Stablecoins are a type of cryptocurrency whose value is pegged to another asset, such as fiat, to which Hong Kong’s stablecoin, HKDR, is pegged with the rule of one HKDR for one Hong Kong dollar. As a currency, stablecoin is expected to “co-operate” with Real-World-Asset (RWA).

With virtual asset regulations on the way and a stablecoin bill sailing through Hong Kong’s Legislative Council, growing interest from major companies, and new currencies entering the scene, stablecoins are slowly stepping into mainstream finance with tokenized virtual assets. The market is evolving faster than imagined.

Hong Kong catching up in Stablecoin Regulation

Hong Kong is setting the stage to become a global hub for stablecoin regulation, with its legislative framework advancing at an impressive pace.

In June 2024, “Stablecoin sandbox,” a regulatory experiment allowing controlled testing of its Hong Kong dollar-pegged HKDR outlined in regulatory guidelines, requires issuers to maintain 1:1 reserves, undergo quarterly audits, and comply with anti-money laundering standards.

Standard chartered–a fiat-issuing bank in Hong Kong, JD, one of the leading e-commerce giants, and RD Technologies, a web3 fintech platform, are the first three participants in the sandbox.

On the legislative side, the push is led by Duncan Chiu, a member of the Legislative Council, who indicated at Hong Kong’s Web3 Festival by that the stablecoin bill is expected to pass by May. This legislative move could pave the way for new stablecoin projects to launch in the latter half of the year, marking a significant milestone in Hong Kong’s digital currency landscape.

Dominic James Maffei, Standard Chartered’s Head of Digital Asset & FinTech in Hong Kong, sees tremendous potential in combining USD stablecoins with high-quality, regulated local currency stablecoins. He believes this combination will foster dynamic market conditions. Maffei points to Japan’s “Project Pax,” where the nation’s three major banks have developed a cross-border payment system using stablecoins, as a successful model that Hong Kong could emulate and potentially improve upon.

The push for regulation comes amidst global scrutiny of stablecoins. The U.S. Securities and Exchange Commission (SEC) has recently clarified its stance on stablecoins, distinguishing between “covered” and non-covered stablecoins The SEC defines “covered” stablecoins as those fully backed by cash or cash equivalents (like Treasury bills), while “non-covered” includes algorithmic or hybrid models. Covered stablecoins, which are fiat-collateralized and do not offer returns to holders, are not classified as securities and enjoy regulatory exemptions. In contrast, non-covered stablecoins, including non-USD stablecoins and algorithmic stablecoins, remain under evaluation, with the SEC not yet stating whether they qualify as securities.

In parallel, Singapore’s Monetary Authority of Singapore (MAS) has approved just three stablecoin issuers under its sandbox regime, requiring 1:1 reserves in cash or government bonds and monthly attestations. This model is now mirrored by Hong Kong, reflecting a cautious yet forward-looking regulatory approach.

Despite these advancements, challenges remain. Alexander Feenie, Managing Partner at Chavanette Advisors, who specializes in regulated digital currencies, notes that while Hong Kong is positioned to lead, the use of stablecoins may still be limited in scope. He suggests that in the future, stablecoins might be permitted for paying taxes and other fees, expanding their utility in everyday transactions.

Angela Wong, a senior advisor at Curec Consulting, highlights the regulatory challenges facing stablecoin issuers. She points out that the licensing process can be lengthy, requiring issuers to establish extensive strategic partnerships to navigate the complex regulatory landscape effectively.

Hong Kong’s proactive stance in regulating stablecoins reflects its ambition to stay ahead in the global financial innovation race. By learning from international examples and setting stringent yet enabling regulations, Hong Kong is poised to attract significant interest from stablecoin issuers and investors worldwide.

From Web 2.0 to 3.0: Stablecoins Meet Offshore RMB

Hong Kong’s regulatory progress is not just theoretical. Companies are already leveraging stablecoins to solve real-world problems—particularly in cross-border trade and remittances, where traditional finance falls short.

Chinese e-commerce giant JD.com launched a Hong Kong dollar-backed stablecoin in July 2024, marking a milestone in its Web3 innovation strategy. The stablecoin, initially deployed in closed-loop systems for cross-border trade, leverages JD’s extensive global supply chain networks. This move coincides with a resurgence in the stablecoin market, now valued at $220 billion—surpassing pre-Terra collapse levels—with monthly transactions exceeding $700 billion, outpacing traditional networks like Visa and Mastercard, according to JD Vice President and Chief Economist Shen Jian Guang.  

Besides, Dr. Shen Jian Guang shared a story illustrating stablecoins’ vitality: a Filipino worker in Hong Kong sending wages abroad faces 1-2% fees and 2-3 days via traditional remittance; to Africa, it costs 6.3% and 7 days. Banks take a day or more; stablecoins settle in seconds to an hour with minimal fees, enabling financial inclusion by drastically cutting costs and time.

While the Philippines does not recognize cryptocurrencies as legal tender, its central bank (BSP) mandates strict AML/KYC compliance for licensed exchanges. This framework supports innovations like Ethereum-based mobile finance, with remittances projected to hit $42 billion by 2023, according to Cryptovest and Ken Research, while wearable tech integration advances decentralized finance. The Philippines has emerged as an early regulatory adopter in the cryptocurrency space, transforming itself into a real-world testing ground for crypto-powered remittances that’s validating stablecoins’ growing role in cross-border payments.

RD Technologies CEO Rita Liu, whose firm participates in Hong Kong’s regulatory sandbox for stablecoin issuers, highlighted growing interest in non-dollar alternatives. “CNH-backed   (Offshore RMB）stablecoins could gain traction as China expands Web3-driven exports to emerging markets,” she noted, highlighting offshore yuan’s potential.  

While stablecoins promise financial inclusion by slashing cross-border costs—Shen cited remittance fees dropping from 6.3% to near-zero—their decentralized nature raises concerns about illicit activities. Drew Propson of the World Economy Forum (WEF) acknowledged digital payments’ role in bridging financial gaps but warned of infrastructure vulnerabilities and surging fraud, which AI-driven safeguards aim to mitigate.  

JD’s venture underscores the dual trajectory of Web3 finance: revolutionizing efficiency while navigating evolving risks.

Stablecoins as the “infrastructure” of RWA

“Stablecoins act as infrastructure—enhancing RWA liquidity through integrated settlement,” said Henry Zhang, Founder & CEO of DigiFT. “Once tokenized, funds can transact or invest instantly. Efficiency gains are undeniable.” Zhang emphasized stablecoins’ role in driving on-chain investments: “Users will prioritize blockchain-based assets if they offer stable returns.”

According to DefiLlama’s March 2025 report, the RWA tokenization sector has surpassed $10 billion in TVL—a 300% increase since 2023. Investment firm Bitwise predicts the RWA market could reach $50 billion by 2025, driven by accelerating participation from Wall Street institutions.

In 2018, St. Regis Aspen Resort tokenized 18.9% ownership via Aspen Coin, raising 18 million at 1 per token. While the project retained a 10,000 minimum investment, newer platforms like Masterworks, Open Eden Labs, and PAX Gold now offer entry points as low as $100.

Fast-forward to this year February 28, China AMC launched Asia-Pacific’s first retail tokenized fund in Hong Kong, the “China AMC HKD Digital Currency Fund,” with a threshold of just HKD 10 ($1.28).

“As Asia’s first retail tokenized fund, we aim to lower barriers,” said Zhu Haokang, Head of Digital Asset Management at ChinaAMC. RWA also injects yield-bearing assets into blockchain ecosystems. “Our contribution lies in bringing real-yield assets on-chain, moving beyond speculative ‘air coins’,” CG Zhou added. The 2022 FTX collapse, partly attributed to the lack of intrinsic value in its FTT token, underscored this need.

In December 2024, Ant Digital Technologies partnered with a major energy company to complete China’s first RWA financing project tied to photovoltaic assets. Financial giants like BlackRock, JPMorgan, and Citigroup are also diving into RWA innovation. Citigroup, for instance, tested the digitalization of private equity funds using Avalanche’s Spruce subnet, aiming to leverage blockchain for operational efficiency.

“Tokenization inherently involves securitization and, at a broader level, democratizes finance,” said CG Zhou, Founder and CEO of CPIC Investment Management (Hong Kong) Limited. Traditional assets like private equity and real estate face high barriers and illiquidity. China’s Securities Regulatory Commission mandates a minimum investment of CNY 1 million ($138,000) for private securities funds, while U.S. rules require “accredited investors” with over 1 million net worth or $200,000 annual income. Real estate investments remain cumbersome, with long transaction cycles and high costs. Though REITs improve liquidity, markets like mainland China remain underdeveloped.

Hong Kong’s regulatory framework mandates licensing for virtual asset platforms to combat money laundering. “Licensing ensures KYC, KYB, AML, and KYT checks before on-chain transactions,” Zhu noted, enabling secure, 24/7 trading with lower costs.

Stablecoins, with their fiat-backed essence, could unlock liquidity for RWA markets. “In emerging markets starved of dollars, stablecoins tap global liquidity pools,” said Rita, CEO of RD Technology, a participant in Hong Kong’s stablecoin sandbox.

Stablecoin adoption is booming in regions facing currency instability. In Sub-Saharan Africa, 43% of crypto transactions used stablecoins by October 2024. Nigeria saw nearly $59 billion in crypto trades from July 2023 to July 2024, heavily dominated by stablecoins. Argentina’s hyperinflation has similarly driven demand for dollar-pegged tokens.

But, challenges persist. Security of smart contracts was questioned during the 2024 Poly Network hack, which drained $620 million through a cross-chain vulnerability, which exposed security challenges for projects that operate across multiple blockchains. Maintaining pegs during volatility is another one. Tether, the largest stablecoin issuer, faced de-pegging incidents in 2018 and 2023. Hong Kong’s regulatory approach to stablecoins, still under development, will test their credibility in formalized markets.

About the Student Reporters

Cynthia Qian, Iris Shu Liu, Aki Leung and Daniel MO are recent graduates of the HKBU International Journalism Program and students of Master of Journalism course on “Covering Cryptocurrency and Blockchain” 

Edited By

Joe Pan is an editor and producer at Blockwind News. He has covered major crypto conferences globally since 2019 and moderated Web3 events across Asia. Joe is part of the founding team of Blockwind News and teaches Asia’s only accredited Master of Journalism course on “Covering Cryptocurrency and Blockchain” at Hong Kong Baptist University.