Hong Kong Passes the "Stablecoin Bill": An Analysis of Its Impact on the Virtual Money Industry in Hong Kong and Mainland China

The Legislative Council of the Hong Kong Special Administrative Region recently passed the "Stablecoin Ordinance Draft," becoming the world's first jurisdiction to establish a comprehensive regulatory framework for fiat stablecoins. This legislative action not only provides a clear legal framework for Hong Kong's Virtual Money industry but also brings profound positive impacts on the development of the Virtual Money industry in Hong Kong and mainland China by balancing financial innovation with risk prevention. This article will analyze the positive significance of the passage of this bill from two dimensions: Hong Kong and mainland China, combining policy background, industry impact, and future trends.

1. Positive Impact on Hong Kong

(1) Strengthen Hong Kong's position as a global digital asset center.

As an international financial center, Hong Kong has been continuously making strides in the virtual asset sector in recent years. The passage of the "Stablecoin Regulation Draft" further consolidates Hong Kong's leadership position in the global digital asset market. The bill clarifies the regulatory requirements for stablecoin issuers, including a registration capital threshold of HKD 25 million, a 1:1 reserve asset backing for issuance, and mandatory unconditional redemption rights. These strict yet clear regulatory standards provide a transparent compliance environment for the stablecoin market, helping to attract global investors and businesses to choose Hong Kong as the operating center for stablecoin activities.

In addition, the Hong Kong Monetary Authority plans to quickly issue regulatory guidelines after the bill is passed and open license applications by the end of 2025. This will attract enterprises, including several financial institutions, to actively participate, accelerating the development and application of the Hong Kong dollar stablecoin. The launch of the Hong Kong dollar stablecoin will not only enhance Hong Kong's competitiveness in the cross-border payment sector but also promote the development of the Web3 ecosystem, injecting new vitality into Hong Kong's digital economy. For instance, the Hong Kong dollar stablecoin can be used for efficient and low-cost cross-border trade settlements, further consolidating Hong Kong's position as a financial hub in Asia.

(2) Promote financial innovation and technological development

The passage of the "Stablecoin Regulation Draft" indicates that the Hong Kong government views stablecoins as an important part of digital financial infrastructure, rather than as a marginal technology. The bill provides a clear compliance path for stablecoin issuers, encouraging enterprises to engage in technological innovation within a regulatory framework. For instance, a major tech group has entered the stablecoin "sandbox" testing phase in Hong Kong, demonstrating corporate confidence in the Hong Kong market. This "regulatory sandbox" mechanism allows companies to test innovative products in a controlled environment, reducing compliance costs for startups while providing room for technological iteration.

Stablecoins, as a core component of decentralized finance (DeFi), will drive further development in areas such as Web3, NFTs, and the metaverse with their legalization. The Hong Kong government has been laying the groundwork for virtual asset regulation since 2022, starting public consultations in 2023 and launching a regulatory sandbox in 2024, demonstrating long-term support for the Web3 ecosystem. The passage of the bill will further stimulate the application of blockchain technology in areas such as payments, settlements, and supply chain finance, creating a vibrant digital asset ecosystem in Hong Kong.

(3) Enhance market confidence and investor protection

The virtual asset industry is facing a trust crisis due to some negative events in the past. Hong Kong has effectively reduced market risks by establishing a comprehensive regulatory system for stablecoins, emphasizing reserve asset management, liquidity, and anti-money laundering (AML) requirements. These measures ensure the sustainability of stablecoin issuers' business models while providing greater security for investors. For example, mandatory 1:1 reserve asset requirements and unconditional redemption rights can effectively prevent the risk of stablecoin decoupling, enhancing market trust in stablecoins.

In addition, Hong Kong's regulatory framework seeks a balance between innovation and protection, demonstrating an open and inclusive attitude. This balance not only attracts the attention of global crypto enterprises but also provides local retail investors with a safer investment channel. For example, a local bank has taken the lead in launching virtual asset trading services, supporting Bitcoin and Ethereum transactions, and may further expand to stablecoin trading in the future. This first-mover demonstration effect will drive more financial institutions to enter the virtual asset market, expanding Hong Kong's investor base.

(4) Promote cross-border payment and financial interconnection

Stablecoins have the advantages of low cost and high efficiency in cross-border payments, and the stablecoin bill in Hong Kong lays the foundation for the widespread application of HKD stablecoins. The launch of HKD stablecoins will optimize the financial connectivity between Hong Kong and other regions in Asia, especially in the context of the "Belt and Road" initiative and the construction of the Guangdong-Hong Kong-Macao Greater Bay Area. For example, HKD stablecoins can be used for cross-border e-commerce, trade settlements, and supply chain finance, reducing transaction costs and improving settlement efficiency. This not only helps Hong Kong consolidate its status as a global trade center but also provides local businesses with more digital financial tools.

2. Positive Impact on the Mainland

(1) Provide regulatory experience reference for the mainland

Mainland China has a relatively strict regulatory attitude towards Virtual Money, prohibiting cryptocurrency business transactions and ICOs, but holds an open attitude towards blockchain technology. The passage of Hong Kong's "Stablecoin Regulation Draft" provides a reference regulatory model for the mainland. Hong Kong's regulatory framework emphasizes the balance between compliance, risk prevention, and financial innovation, which aligns with the mainland's policy goals of promoting the application of blockchain technology in the financial sector (such as digital RMB).

For example, Hong Kong's "regulatory sandbox" mechanism provides a testing environment for stablecoin issuance, and this model may inspire the mainland to explore similar pilot mechanisms in specific areas (such as central bank digital currency CBDC or supply chain finance). As a bridge between the mainland and international markets, Hong Kong's successful experience may promote the gradual relaxation of regulatory restrictions on virtual assets such as stablecoins in the mainland in the future, especially in the field of stablecoins pegged to the Hong Kong dollar or Renminbi.

(2) Promote the internationalization of the Renminbi

Hong Kong's stablecoin legislation provides a testing ground for non-USD stablecoins (such as those pegged to the Hong Kong dollar or the Renminbi). Although current stablecoin regulation in Hong Kong primarily focuses on Hong Kong dollar stablecoins, its open regulatory attitude creates possibilities for the exploration of Renminbi stablecoins. As an offshore center for the Renminbi, Hong Kong has a mature financial infrastructure and an international market environment, making it suitable as a testing ground for Renminbi stablecoins. If Renminbi stablecoins succeed in Hong Kong, it will further promote the use of the Renminbi in global payments and settlements, aiding the process of Renminbi internationalization.

For example, the stablecoin regulatory framework in Hong Kong may provide compliant channels for mainland enterprises to issue RMB-pegged stablecoins through Hong Kong, for cross-border trade and investment. This model not only enhances the international acceptance of the RMB but also provides new financing and payment tools for mainland enterprises, strengthening their competitiveness in the global market.

(3) Promote the coordinated development of financial technology in the Guangdong-Hong Kong-Macao Greater Bay Area

The Guangdong-Hong Kong-Macao Greater Bay Area is an important region for mainland China to promote the application of financial technology and blockchain technology. Hong Kong's stablecoin legislation provides new opportunities for the coordinated development of financial technology in the Greater Bay Area. For example, the Hong Kong dollar stablecoin can complement the digital renminbi, jointly serving the cross-border payment, trade financing, and supply chain finance needs of the Greater Bay Area. Hong Kong's regulatory experience and mature financial market can provide compliance guidance for Greater Bay Area enterprises, attracting more mainland technology companies to enter the international market through Hong Kong.

In addition, virtual money trading platforms and stablecoin issuers in Hong Kong may collaborate with mainland enterprises to develop blockchain-based financial products. For example, stablecoins can be used in supply chain finance platforms in the Greater Bay Area to address the financing difficulties of small and medium-sized enterprises. This cross-regional cooperation will promote the integration and development of the financial technology ecosystem in the Greater Bay Area.

(IV) Indirectly stimulate the application of blockchain technology in the region

Although the mainland has a cautious attitude towards cryptocurrency trading, blockchain technology has been widely applied in fields such as supply chain finance, cross-border payments, and digital identity verification. Hong Kong's stablecoin legislation provides a successful case for the commercialization of blockchain technology, which may indirectly stimulate mainland enterprises to accelerate the research and application of blockchain technology within a compliant framework. For example, Hong Kong's stablecoin "sandbox" testing experience can provide technical references for mainland enterprises, promoting the implementation of blockchain in the fintech sector.

3. Future Trend Outlook

The passage of the Hong Kong "Stablecoin Regulation Draft" marks a new stage in global stablecoin regulation. In the future, Hong Kong may become a global testing ground for non-US dollar stablecoins, attracting more international companies into its market. At the same time, Hong Kong's regulatory model may provide a reference for other countries and regions, promoting coordination and development of global stablecoin regulation.

For mainland China, Hong Kong's successful experience may encourage regulators to gradually relax restrictions on virtual assets in the future, especially in areas related to the internationalization of the Renminbi. Mainland enterprises can participate in the global digital asset market through compliant channels in Hong Kong, enhancing their international competitiveness. In addition, financial technology cooperation between Hong Kong and the mainland will be further deepened under the framework of the Guangdong-Hong Kong-Macao Greater Bay Area, forming a model for regional collaborative development.

IV. Conclusion

The passage of the Hong Kong "Stablecoin Ordinance Draft" has a far-reaching positive impact on the virtual money industry in Hong Kong and mainland China. For Hong Kong, the bill consolidates its position as a global digital asset hub, promoting financial innovation, investor protection, and the development of cross-border payments. For mainland China, Hong Kong's regulatory experience provides a reference, stimulating the internationalization of the Renminbi, the collaborative development of fintech in the Guangdong-Hong Kong-Macao Greater Bay Area, and the indirect promotion of blockchain technology applications. In the future, as the stablecoin market in Hong Kong matures and further cooperation with mainland China develops, both sides will occupy a more significant position in the global digital finance field, injecting new momentum into regional economic development.