LettersHong Kong mustn’t fall behind in recognising overseas stablecoins
Readers discuss a recognition framework for dollar-denominated stablecoins, and the significance of Beijing’s offshore insurance tax for Hong Kong
In late June, the Financial Services and the Treasury Bureau (FSTB) and the Hong Kong Monetary Authority (HKMA) confirmed that Hong Kong’s laws are ready for tokenised bonds. What sounds like a legal technicality is a springboard for the financial markets of the future.
Bonds, a mainstay of the financial system, can now be tokenised on a blockchain, enabling them to be bought, sold and settled almost instantly under Hong Kong’s existing legal frameworks.
But every trade has two sides: the asset changing hands, and the cash that settles it. Tokenising the bond speeds up the first side. It does nothing for the second, unless the money moves just as fast.
That’s where stablecoins come in: digital tokens pegged to a fiat currency, the only on-chain settlement asset that’s widely available and already the default way institutions settle tokenised trades worldwide.
The problem is that 99 per cent of that market is US dollar-backed, and Hong Kong currently has no recognition or equivalence framework that lets even the most rigorously regulated dollar-denominated stablecoins fully operate here.