Feel strongly about these letters, or any other aspects of the news? Share your views by emailing us your Letter to the Editor at [email protected] or filling in this Google form. Submissions should not exceed 400 words, and must include your full name and address, plus a phone number for verification The Hong Kong Monetary Authority’s upcoming
stablecoin regime is serendipitous, given that the world’s first stablecoin, BitUSD, was issued 10 years ago. Although it pioneered the concept of a stablecoin in July 2014, its subsequent loss of parity with the US dollar highlighted the early challenges faced by stablecoins, such as inadequate mechanisms, unreliable backing and lack of oversight.
Regulators often face criticism for being too slow to respond to market innovation. Yet, this is a clear case where timing and prudence are much more important than speed. The HKMA’s legislative proposals come at an opportune time. Today, stablecoins are underpinned by more secure, scalable technologies and benefit from the insights gained through early failures. In the maturation of these digital currencies, the regulator’s emphasis on banking reserves and high-quality assets is a key move.
Yet often missed in the detail is the flywheel effect stablecoins can bring to Hong Kong’s wider economy. Stablecoins benefit from 24/7 markets, low transaction costs and are programmable, creating a foundation for entirely new business models beyond finance to be built in areas such as supply chain management, retail and real estate.
Meanwhile, regulatory clarity aligns stablecoins with traditional financial standards. This enhances their potential exchangeability with central bank digital currencies such as the
e-HKD or
e-CNY, as well as traditional financial services. The resulting novel business models can benefit from the multiplier effect that the trillions of dollars managed and exchanged through an international financial centre such as ours can bring.
Whether this was intentional, stablecoin regulation isn’t just about financial stability; it is about triggering a series of transformative changes – each small shift creating ripples that build into significant economic waves. As Chief Executive John Lee Ka-chiu champions Hong Kong’s “
headquarters economy”, perhaps the momentum of stablecoins can also attract non-traditional companies eager to capitalise on the shift towards digital money.
