Hong Kong's Stablecoin Ordinance Paves Way for Global Trade Innovation

Christopher Hui, the Financial Secretary and Treasury Bureau Director of the Hong Kong Special Administrative Region Government, recently discussed the potential of stablecoins in an interview at the Lujiazui Forum. He emphasized that the use of stablecoins should focus on addressing economic pain points rather than merely pursuing technological advancements or interoperability. Hui outlined the regulatory framework for stablecoin issuance, which includes requirements for the issuer to have sufficient capital, maintain a reserve fund equal to the value of the unredeemed stablecoins, and complete currency exchanges within one trading day.

Regarding the possibility of stablecoins accelerating the internationalization of the Chinese Yuan, Hui acknowledged that this is not ruled out from a regulatory perspective. He noted that Hong Kong's regulatory framework allows stablecoins to be pegged to different legal tenders. However, he also highlighted the need to consider the country's overall exchange rate and monetary policy if such a move were to be implemented. Hui emphasized that while there is some legal space for this, specific operations would require a comprehensive risk assessment and evaluation of the overall benefits and drawbacks.

In the summer of 2025, China’s digital economy is witnessing a significant transformation. While the mainland maintains a strict ban on cryptocurrencies, Hong Kong is emerging as a hub for stablecoins, with major tech companies leading the charge. This divergence is rooted in the "One Country, Two Systems" principle, which allows Hong Kong to operate under its own economic and legal framework, separate from mainland China.

The passage of the "Stablecoin Ordinance" by Hong Kong’s Legislative Council on May 21, 2025, marked a pivotal moment. This legislation establishes a comprehensive regulatory framework for fiat-backed stablecoins, aiming to create a transparent and compliant environment for digital tokens pegged to stable assets. The ordinance mandates that issuers maintain a 100% reserve of high-quality, liquid assets to back their stablecoins, ensuring stability and trust. It also prohibits fractional reserves and requires regular audits, addressing transparency concerns that have plagued the industry.

The Hong Kong Monetary Authority (HKMA) has been instrumental in this initiative, using a "regulatory sandbox" to allow companies to test their stablecoin models in a controlled environment. This collaborative approach has attracted both tech giants and traditional financial institutions, signaling a merger of innovative technology with stable, compliant finance. The HKMA’s stringent requirements, including a minimum paid-up capital and strict reserve mandates, ensure that only well-capitalized and compliant entities can issue stablecoins.

The strategic importance of this move lies in its potential to create new financial highways for global trade and finance. While China’s domestic payment systems are highly advanced, they are primarily focused on domestic retail use. The e-CNY, China’s Central Bank Digital Currency, is also designed for domestic transactions and is not yet suitable for global trade. Stablecoins, on the other hand, offer a solution for cross-border B2B commerce, providing a more efficient and non-U.S.-controlled set of financial rails.

China’s tech giants see a multi-trillion-dollar opportunity in stablecoins, aiming to disrupt the SWIFT network, which is slow, expensive, and dominated by the United States. By using stablecoins, companies can facilitate instant, near-free cross-border payments, reducing friction and cost in international commerce. This is a revolutionary leap in efficiency, cost, and speed, eliminating intermediaries and improving cash flow for businesses.

The geopolitical implications of this move are significant. The U.S. dollar’s dominance in the global financial system grants the United States immense geopolitical power. The rise of stablecoins has so far only reinforced this reality, with the global stablecoin market being overwhelmingly dollar-denominated. China’s strategy in Hong Kong aims to build a viable alternative to the dollar-dominated digital financial system, potentially accelerating the internationalization of the renminbi. An offshore yuan stablecoin issued from Hong Kong could allow international traders to settle trade directly in a digital yuan-equivalent, bypassing the U.S. dollar and the SWIFT network.

This initiative is not just about creating a new payment app; it is about building the new financial railroad for the 21st-century global economy. By establishing a robust and comprehensive regulatory framework for stablecoins, Hong Kong is positioning itself as a global hub for digital assets, attracting institutional capital and compliance-focused corporations. This move signals China’s ambition to challenge the U.S. dollar’s dominance and create new financial rails that are immune to U.S. economic statecraft.