Host: Stephanie LI

Guest: Jack Zhang, SFC Hong Kong Correspondent

Stephanie: Hello, everyone! Welcome to CBN Correspondent. Today, we’re diving into the world of stablecoins and the regulatory race heating up between Hong Kong and the U.S. Joining me is Jack Zhang, our reporter in Hong Kong who has recently been covering the stablecoins regulation in the city. Jack, thanks for being here!

Jack: Thanks for having me, Stephanie. Excited to talk about this pivotal moment in digital finance.

Stephanie: Let’s start with the big news: Hong Kong recently passed the Stablecoins Ordinance, becoming the first jurisdiction to fully regulate fiat-backed stablecoins. Why is this a big deal, and why did Hong Kong move so quickly?

Jack: Great question. Think of it as a battle for financial dominance in the digital age. The global stablecoin market hit US$250 billion in 2025, approximately the amount of M2 money supply in the U.S., and countries realize whoever masters regulation will shape the future of payments and finance. Hong Kong’s move is strategic—they want to solidify their role as an international financial center.

But it’s not just about status. Stablecoins like USDT have faced scrutiny over opaque reserves—remember, only 83% of Tether’s reserves meet the U.S. GENIUS Act’s standards.

Hong Kong saw a gap: by mandating strict reserve separation, regular audits, and 1:1 redemption guarantees, they’re creating a trust framework that could attract global issuers tired of regulatory ambiguity.

Stephanie: So it’s both a defensive and offensive play—protecting their market while positioning for growth. How does this fit into Hong Kong’s broader Web 3.0 strategy?

Jack: Exactly. Since 2023, Hong Kong has rolled out policies like the Virtual Asset Trading Platform regime. The stablecoin ordinance complements that, creating a full-stack regulatory ecosystem. As Jeffrey Ding, Chief Analyst of HashKey Group said, it’s about balancing innovation and risk—giving businesses a clear “playbook” while preventing another TerraUSD collapse.

HashKey Exchange is the largest licensed virtual asset exchange in Hong Kong. During the legislative process of stablecoins, as an industry representative, it actively participates in policy consultation and promotes the implementation of the compliance framework.

Stephanie: Speaking of the U.S., their GENIUS Act is also making waves. How does Hong Kong’s framework differ from what’s happening in the U.S.?

Jack: Let’s break it down. Both focus on fiat-backed stablecoins, but the how differs. The U.S. uses a dual regulatory system—federal laws plus state oversight.

Hong Kong, though, centralizes regulation under the Monetary Authority (HKMA). That’s simpler, but they also stay flexible. For instance, they welcome non-HKD stablecoins (like USD or offshore yuan), whereas the U.S. leans more toward dollar-centric rules. Hong Kong’s approach is about being a “neutral hub”—open to global issuers but with tight controls on reserves and transparency.

Stephanie: Are there similarities?

Jack: Absolutely. Both stress “same risk, same regulation”—meaning stablecoin activities should be regulated like similar financial services. But in Hong Kong’s regulation, it explicitly targets cross-border promotion. If a stablecoin markets to Hong Kong users, even from overseas, it needs a license. That’s a smart move to curb regulatory arbitrage.

Stephanie: You mentioned flexibility. How does Hong Kong balance strict rules with innovation?

Jack: Look at their sandbox approach. Companies like JD Coinlink are testing stablecoins in phases—first with B2B cross-border payment, then expanding to retail. The HKMA isn’t shutting down experimentation; it’s guiding it. For example, they allow issuers to hold a mix of cash and high-quality liquid assets (like government bonds), as long as they’re segregated and audited monthly. That’s more pragmatic than the U.S., which leans toward stricter cash-only reserves.

Also, Hong Kong’s geographic edge can’t be ignored. Sitting at the crossroads of Chinese mainland and Southeast Asia, it’s ideally placed to test cross-border use cases. Imagine a Hong Kong-issued stablecoin settling trades between a Shenzhen manufacturer and a Singaporean buyer—fast, cheap, and blockchain-based. That’s the future they’re betting on.

Hong Kong’s openness to multi-currency stablecoins gives it a unique angle. If a Hong Kong issuer can offer USD, HKD, and CNY stablecoins under one license, that’s a one-stop shop for global businesses—a huge selling point.

Stephanie: Let’s shift to the bigger picture. How could Hong Kong’s stablecoin framework impact the yuan’s global role?

Jack: This is where it gets really interesting. China has long wanted to reduce reliance on the SWIFT system, and stablecoins offer a potential workaround. Hong Kong’s ordinance doesn’t mention RMB directly, but issuers like JD Coinlink are eyeing offshore yuan stablecoins. Imagine a digital yuan proxy—regulated in Hong Kong, backed by yuan reserves, and used for trade settlements across Asia.

Now, there are hurdles. Offshore yuan stablecoins need careful coordination. But thanks to the “one country, two systems” policy, Hong Kong is able to do the experimentation.

As the yuan is increasingly being accepted by more economies and market players, driving its internationalization, stablecoins could become tools for monetary sovereignty, said Sha Jun, a legal expert from Yingke Law Firm.

Stephanie: Could this challenge SWIFT?

Jack: Maybe not overnight, but consider the stats: traditional cross-border payments cost 6.4% in fees and take days. Stablecoins do it in minutes for pennies. If Hong Kong can onboard enough businesses (like the 30,000+ cross-border firms in their ecosystem), the network effect could grow exponentially.

OKG Research predicts stablecoins could handle USD100 trillion in transactions by 2030—that’s twice the current global GDP. SWIFT isn’t going away, but stablecoins might carve out a significant niche, especially in Asia.

Stephanie: Sounds promising, but what are the risks?

Jack: Trust is the biggest hurdle. USDT has dominated for years, despite its controversies. Convincing users and institutions to switch to a Hong Kong-regulated stablecoin requires time and marketing. Also, retail adoption is tricky—consumers won’t switch payment methods unless there’s a killer app. Right now, stablecoins shine in businesses and crypto trading, but customers use is lagging.

Competition is another factor. The EU is drafting its own stablecoin rules, and Singapore is watching closely. Hong Kong needs to keep innovating—maybe by linking stablecoins to its digital yuan pilot or integrating with ASEAN’s payment systems.

Stephanie: To wrap up, how do you see Hong Kong’s role evolving in this space?

Jack: Hong Kong is creating a template for how to regulate digital assets without stifling innovation. This could be a blueprint for other jurisdictions, especially in emerging markets.

For China, it’s a crucial step to push for yuan internationalization in digital form. For the world, it’s a sign that the financial landscape is shifting—away from traditional banking systems and toward a more decentralized, blockchain-driven future. Whether Hong Kong can maintain this edge depends on execution, but so far, they’ve thrown down the gauntlet.

Stephanie: Fascinating. Thanks for breaking it down, Jack. For our listeners, if you want to dive deeper, we’ll link to Jack’s full report on the Hong Kong Stablecoins Ordinance. Until next time.

Jack:Thanks for having me, Stephanie. Stay curious, everyone!

Executive Editor: Sonia YU

Editor: LI Yanxia

Host: Stephanie LI

Correspondents: Jack Zhang

Sound Editor: Stephanie LI

Graphic Designer: ZHENG Wenjing, LIAO Yuanni

Produced by 21st Century Business Herald Dept. of Overseas News.

Presented by SFC