On May 30, 2025, the Hong Kong Special Administrative Region government officially gazetted the Stablecoin Ordinance, marking a pivotal moment in global financial regulation. Hong Kong has become the world’s first jurisdiction to establish a comprehensive, end-to-end regulatory framework for fiat-backed stablecoins. The new law mandates that issuers maintain a minimum capital of HK$25 million, hold fully backed reserves in high-quality, liquid assets, and guarantee users unconditional redemption rights. This landmark legislation sets a clear legal foundation for the stablecoin market and opens transformative opportunities—especially for mainland Chinese financial institutions seeking strategic footholds in the digital asset ecosystem.
With Hong Kong positioned as a regulated testing ground for digital finance, a pressing question emerges: Can Chinese banks leverage this regulatory “icebreaker” to expand their cross-border influence? Drawing from existing policy dynamics and pilot programs involving institutions like Standard Chartered Hong Kong and JD Technology, we explore how mainland banks can participate in and benefit from this evolving landscape.
Regulatory Divergence Creates Strategic Opportunity
Hong Kong’s proactive stance on stablecoin regulation contrasts sharply with mainland China’s cautious approach—creating a structural window for innovation.
The Hong Kong Monetary Authority (HKMA) launched a Hong Kong dollar stablecoin regulatory sandbox in March 2024, welcoming participants such as Standard Chartered Hong Kong and JD Blockchain Technology. The Stablecoin Ordinance formalizes three core regulatory pillars:
- Full reserve backing by high-liquidity assets, held in segregated custody
- Par value redemption rights for all stablecoin holders
- Compliance with anti-money laundering (AML) standards, regular audits, and qualified personnel requirements
As Deputy Financial Secretary Nelson Chan emphasized, the goal is to balance financial innovation with risk control, ensuring stablecoins function as reliable payment instruments.
In contrast, mainland China maintains strict prohibitions on cryptocurrency trading and initial coin offerings (ICOs). The People’s Bank of China’s 2023 Financial Stability Report warns of “dual risks” from financial and technological disruption, advocating for consistent oversight across similar activities. However, it supports blockchain applications—most notably, the digital yuan (e-CNY)—for targeted use cases.
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This divergence creates a unique opportunity: mainland banks can use Hong Kong as a low-risk proving ground to test stablecoin models without violating domestic restrictions.
Participation Models for Chinese Banks
Mainland financial institutions can engage with Hong Kong’s stablecoin ecosystem through multiple strategic entry points.
Joint Issuance Partnerships
Standard Chartered Hong Kong partnered with Animoca Brands and Hong Kong Telecom to form a joint venture aiming for one of the first stablecoin licenses. This “finance + tech + use case” triad model leverages banking credibility, Web3 development expertise, and real-world payment infrastructure. Mainland banks can replicate this via offshore subsidiaries or strategic alliances.
Technology Enablement
JD Technology entered the HKMA sandbox with its HKD-pegged stablecoin, built on optimized versions of its domestic e-commerce payment architecture. Similarly, Jincai Interconnection’s tax compliance platform has been designated mandatory for licensed issuers, automating blockchain-based tax reporting. Mainland fintech capabilities in AML monitoring, cross-chain analytics, and regulatory reporting are directly transferable.
Infrastructure & Gateway Services
Virtual banks like ZA Bank already offer fiat on-ramps for Bitcoin and Ethereum trading. Mainland banks with Hong Kong branches can provide fiat settlement, custody services, or act as liquidity providers on licensed platforms—participating indirectly while maintaining compliance.
Strategic Roles Across the Stablecoin Value Chain
Stablecoins unlock new revenue streams and operational roles for traditional banks.
Issuance as Digital Liability Management
Issuing stablecoins is akin to digitizing deposits. JPMorgan’s JPM Coin evolved into the Kinexys platform, processing over $20 billion daily. By issuing stablecoins backed by customer deposits, banks can redeploy capital into low-risk instruments like government bonds—earning spreads with near-zero funding costs. Industry estimates suggest profit margins between 15% and 30% on issuance operations.
Reserve Custody & Risk Mitigation
Banks’ robust asset protection frameworks give them an edge in managing stablecoin reserves. A prime example is Standard Chartered’s collaboration with OKX on a “collateral mirroring” project, where the bank safeguards crypto collateral while OKX handles trading execution—an elegant solution to trust issues in decentralized environments.
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Next-Gen Payment & Settlement
Visa projects that stablecoin transaction volume will reach $6.7 trillion by 2025**, with per-transaction costs under $0.00025—less than 0.1% of traditional cross-border fees. By integrating Hong Kong’s stablecoin rails with mainland systems like CIPS (Cross-border Interbank Payment System), banks could enable sub-second settlements** across Asia.
Pathways to Market Entry
Chinese banks can adopt a phased approach to enter this space:
1. Licensing & Equity Investment
Establish a Hong Kong subsidiary to apply for an issuer license or invest in sandbox-tested firms like RoundCoin (HKDR project), minimizing initial risk. Institutions such as Bank of China (Hong Kong) and ICBC Asia already possess regulatory familiarity and local presence.
2. Fintech System Export
Deploy proven mainland technologies:
- Automated tax compliance engines
- On-chain AML tools detecting mixer usage
- Cross-chain data interpreters linking Hong Kong blockchains with China’s Golden Tax IV system
3. Offshore RMB Stablecoin Innovation
As the world’s largest offshore RMB hub, Hong Kong is ideal for piloting RMB-pegged stablecoins under HKMA supervision. These could facilitate cross-border trade settlements and advance RMB internationalization.
4. Greater Bay Area Integration
Pilot use cases within the Guangdong-Hong Kong-Macao Greater Bay Area:
- Replace costly letters of credit in cross-border e-commerce
- Enable smart contract-driven supply chain finance
- Facilitate tokenized asset trading, connecting Hong Kong’s virtual asset ETFs with mainland investors
Benefits and Risks: A Dual-Edged Transformation
While promising, stablecoin adoption brings both transformation and turbulence.
Value Creation
- Payments: Lower costs and faster settlement drive innovation in real-time banking systems.
- Lending: DeFi platforms using stablecoins challenge traditional credit models, pushing banks toward fintech partnerships.
- Asset Management: Tokenization simplifies securitization, boosting liquidity and efficiency in capital markets.
Risk Exposure
- Deposit Disintermediation: Up to $6.6 trillion in transactional deposits globally may shift to stablecoins.
- Market Volatility Spillover: Crypto market swings can rapidly affect bank-held digital assets.
- Systemic Risk: Poorly regulated stablecoins facing redemption runs could threaten financial stability.
Innovation Through Integration
As董一岳 (Dong Yiyue) of the Hong Kong Financial Development Council noted: “Without a robust stablecoin infrastructure, there can be no true Web3 leadership.” Stablecoins are not disruptors—they are catalysts for modernizing legacy finance.
Hong Kong’s regulatory clarity offers mainland institutions a rare chance to innovate safely. By leveraging their strengths in blockchain development, cross-border compliance, and Greater Bay Area connectivity, Chinese banks can “sail through Hong Kong” to test RMB or HKD stablecoin models. These experiments can feed into broader goals like digital RMB expansion and global financial integration—supporting China’s vision of high-quality growth and open economic engagement.
Frequently Asked Questions
Q: What is the minimum capital requirement for stablecoin issuers in Hong Kong?
A: Issuers must have a minimum registered capital of HK$25 million under the Stablecoin Ordinance.
Q: Can mainland Chinese banks directly issue stablecoins under this law?
A: Not directly from the mainland—but their Hong Kong subsidiaries or joint ventures can apply for licenses if they meet capital, compliance, and governance requirements.
Q: How does Hong Kong ensure stablecoin reserves are fully backed?
A: Reserves must be held in high-quality, liquid assets (like cash or short-term government bonds), kept in segregated accounts, and subject to regular independent audits.
Q: Is the digital yuan (e-CNY) considered a stablecoin?
A: No. While both are digital and pegged to fiat, e-CNY is a central bank digital currency (CBDC), not privately issued like most stablecoins.
Q: How might stablecoins impact traditional cross-border remittances?
A: They can reduce transaction times from days to seconds and cut fees by over 90%, posing both competitive pressure and partnership opportunities for banks.
Q: Are there plans for a renminbi-backed stablecoin in Hong Kong?
A: While not yet launched, industry experts suggest Hong Kong could serve as a regulatory sandbox for offshore RMB-pegged stablecoins used in trade settlement.
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