77 stablecoin license applications: How will Hong Kong make its choice?

Authors: Zhu Weisha, Zhang Feng

1. Introduction: A New Regulatory Landscape of Opportunities and Challenges

The Hong Kong Monetary Authority announced recently that as of August 31, 2025, a total of 77 institutions have expressed their intention to apply for a stablecoin license, covering various entities such as banks, technology companies, securities firms, and payment institutions. This data reflects the high level of market attention to Hong Kong's stablecoin regulatory framework, as well as the impending regulatory challenges and practical choices that follow.

Faced with such a large number of applications, the Hong Kong SAR government and financial regulatory authorities find themselves in a sweet dilemma. If all are approved, regulatory resources will face immense pressure; if only a few are approved while the unapproved firms also meet the legal requirements, it may affect Hong Kong's reputation for the rule of law. Behind this approval dilemma lies a deeper question: How should Hong Kong seize the historical opportunity of stablecoin development while avoiding potential financial risks?

II. The Essence of Stablecoin Competition: Competition Between Nations and the Call for Entrepreneurial Spirit

The competition among stablecoins appears to be a technological race between companies, but in essence, it is a contest of financial strength and institutional advantages among countries. The fiat currency system can be divided into three categories: commodity currencies (such as the US dollar and the euro), pegged currencies (such as the Hong Kong dollar), and sovereign currencies (such as the Japanese yen and the Chinese yuan). The rise of the US dollar stablecoin poses a challenge to all sovereign currencies, and many weaker sovereign currencies may gradually withdraw from the international market.

In this global competition, entrepreneurship plays a crucial role. Historically, financial innovations have often been driven by entrepreneurs. In 1694, Scottish entrepreneur William Paterson founded the Bank of England, addressing the financial crisis of the British government and laying the foundation for the modern monetary system. In 1983, the entrepreneurially-minded Financial Secretary John L. P. Cheng led the implementation of the linked exchange rate system, saving Hong Kong from a currency crisis and establishing its status as an international financial center.

Today, Hong Kong is at a critical juncture in the development of stablecoins, needing to balance risk management and innovative vitality, which cannot be separated from the spirit of entrepreneurship. Professional managers are skilled at executing systems but often act with caution when faced with major decisions. Hong Kong needs to combine professional regulation with entrepreneurial innovation to seize the historical opportunity for the development of stablecoins.

3. Analysis of the Advantages and Disadvantages of the Three Types of Stablecoin Issuance

( A Hong Kong Dollar Stablecoin: Real Constraints and Institutional Reconstruction

The Hong Kong dollar stablecoin faces significant real constraints. The Hong Kong dollar adopts a linked exchange rate system, pegged to the US dollar, with fluctuations controlled within 1%, and must be regulated by the Monetary Authority. If multiple companies are allowed to issue Hong Kong dollar stablecoins, speculators may exploit the price differences between the US dollar, Hong Kong dollar, and stablecoins for arbitrage, leading to uncontrollable risks.

Therefore, the issuance of the Hong Kong dollar stablecoin should be reconstructed based on the existing monetary system. The best solution is for the Monetary Authority to rely on the linked exchange rate system and designate three note-issuing banks (HSBC, Standard Chartered, Bank of China Hong Kong) to issue the Hong Kong dollar stablecoin. This approach maximizes the use of the existing system while incorporating the credit and stability of the stablecoin into the management scope of the Monetary Authority.

) (2) US Dollar Stablecoin (USHK): A Major Opportunity in Hong Kong

The US Dollar stablecoin (USHK) presents significant development opportunities for Hong Kong. The stability of the US Dollar itself is managed by the Federal Reserve, while the Monetary Authority only needs to ensure the peg between USHK and the US Dollar. The issuance mechanism can be compared to that of the Hong Kong Dollar stablecoin, but the issuing entities can be expanded to multiple qualified institutions, rather than being limited to just three banks.

The advantages of USHK are obvious

Innovative Yield Mechanism: The Monetary Authority can allocate a portion of the interest from its held U.S. Treasury bonds to the issuing institutions, which is significantly more attractive compared to Tether (no interest) and institutions restricted by the U.S. "Genius Act."

Credit Transparency: The Monetary Authority has 42 years of accumulated credibility, with mature and transparent auditing and operational processes, far surpassing private institutions like Tether.

Unified Brand Effect: The unified use of the USHK brand is beneficial for achieving economies of scale and international acceptance, and it better represents the characteristics of Hong Kong as a financial center.

Implementation Path

Preferably choose Ethereum as the issuance chain due to its stable consensus mechanism and high transparency;

At the same time, establish a transparent centralized database based on Ethereum to strengthen AML/CFT controls.

Formulate specific implementation rules to ensure compliance with banking-level KYC, AML, and CFT standards.

From a geopolitical perspective, as a rule-of-law country, the United States is unlikely to intervene in Hong Kong's peg to the US dollar or the issuance of USDT-like products, thus the launch of USHK has international legitimacy.

(3) Renminbi Stablecoin (CNHK): Cautiously advancing limited options

A similar mechanism can also be applied to the issuance of the RMB stablecoin CNHK, but it should be strictly limited to the offshore RMB market, with a controllable scale (approximately 3 trillion), and should not affect the financial stability of the mainland. If attempting to promote the internationalization of the RMB, it would be constrained by the reality that the RMB is not freely convertible, and the above method would not be applicable.

Some believe that a gold-backed issuance of the renminbi stablecoin could be introduced, but this idea is outdated and shortsighted, lacking an understanding of cryptocurrencies born in the internet age. The development of the renminbi stablecoin should be cautiously advanced, with the premise of not undermining financial stability in the mainland.

IV. Comprehensive Analysis of Approval Decisions: Weighing Pros and Cons and Regulatory Innovation

Pros and Cons of Full Approval. If the applications of all 77 institutions are fully approved, it will send a positive signal of Hong Kong embracing financial innovation, attracting more institutions to settle in Hong Kong and enhancing market vitality in the short term. However, regulatory resources will face immense pressure, which may lead to inadequate regulation and increased financial risks. The issuance of homogeneous stablecoins by multiple institutions may result in market fragmentation, reducing economies of scale.

Pros and Cons of Selective Approval. Selectively approving a small number of institutions (such as 10-15) can ensure regulatory quality, reduce systemic risk, and facilitate the concentration of resources to nurture strong institutions. However, this may raise fairness concerns, as unapproved but eligible companies may file legal lawsuits, damaging Hong Kong's reputation for the rule of law. Furthermore, overly strict selection criteria may stifle market innovation.

V. Policy Recommendations: Rational Choices to Seize Historical Opportunities

Establish a differentiated regulatory framework. Implement categorized management for stablecoin issuers of different natures and formulate differentiated regulatory requirements. Impose stricter regulations on systemically important stablecoins while appropriately relaxing conditions for limited scope stablecoins.

Prioritize the development of the US Dollar stablecoin (USHK). Concentrate resources on developing USHK and establish it as a core competitiveness of Hong Kong. Utilize Hong Kong's rule of law advantages, financial infrastructure, and international status to make USHK a safer and more transparent US Dollar stablecoin option than USDT.

Strictly control the issuance of HKD stablecoins. Maintain a prudent attitude towards the issuance of HKD stablecoins, limited to three issuing banks, to ensure consistency with the linked exchange rate system and to avoid arbitrage activities and financial risks.

Cautiously promote the RMB stablecoin. The development of the RMB stablecoin should be strictly limited to offshore markets, with controllable scale, to avoid impacting the financial stability of the mainland. Pilot projects can be initiated first, and after accumulating experience, it can be gradually expanded.

Introduce a regulatory sandbox mechanism. To balance innovation and risk, introduce a regulatory sandbox mechanism that allows enterprises to test new stablecoins and related technologies in a controlled environment, providing practical basis for the improvement of the regulatory framework.

Strengthen the Application of Regulatory Technology. Increase investment, enhance the level of regulatory technology, and utilize technologies such as blockchain, big data, and artificial intelligence to achieve real-time monitoring and risk assessment, improving regulatory efficiency and accuracy.

Foster Entrepreneurial Spirit. Reserve space for innovation within the regulatory framework, encouraging professionals with an entrepreneurial spirit to participate in policy formulation and implementation, and avoid overly conservative managerial thinking that hinders financial innovation.

VI. Conclusion: Hong Kong's Historical Choices

The 77 applications for stablecoin licenses represent both challenges and opportunities. The key choice facing Hong Kong is not simply "approve or disapprove," but how to maximize the benefits of stablecoin development through differentiated regulation and institutional innovation, while minimizing potential risks.

The USD stablecoin USHK represents a significant historical opportunity for Hong Kong. The Hong Kong dollar, as a USD-pegged currency, will not be impacted by the rise of USD stablecoins; if managed well, it could benefit. Hong Kong is expected to attract the adoption of USHK from other small-scale economies, leveraging its sovereign credibility and financial infrastructure, marking a significant historical opportunity for Hong Kong.

The essence of stablecoin competition is competition between countries. Hong Kong needs to demonstrate entrepreneurial spirit, balancing risk control with innovative vitality. Regulators in Hong Kong should show historical responsibility, maintaining the rigor of regulation while also being inclusive of innovation, seizing the historical opportunity for the development of stablecoins.

Hong Kong has the potential to become a leader in the global stablecoin development, but this requires wise decision-making, innovative regulation, and entrepreneurial spirit. The approval decisions of 77 applications will serve as a touchstone to test the quality of Hong Kong as an international financial center, and it is also a key battle that will determine whether Hong Kong can continue to maintain its competitiveness in the digital economy era.