Author: He Liuying, Jiemian News

Stablecoins have set off another round of market craze.

Recently, there have been reports that Ant International is planning to apply for stablecoin licenses in Hong Kong and Singapore. On June 12, Ant International responded that it is accelerating investment and expanding cooperation in global treasury management, and putting the company's AI, blockchain and stablecoin innovations into real and reliable large-scale applications.

"We welcome the Hong Kong Legislative Council's passage of the Stablecoin Bill. We will submit our application as soon as possible after the bill comes into effect on August 1 and the relevant channels are opened. We hope to contribute more to Hong Kong's construction of a future international financial center." Ant International said.

It was also reported that Bian Zhuoqun, vice president of Ant Group and president of Ant Digits' blockchain business, revealed in an interview that Ant Digits has started applying for a Hong Kong stablecoin license and has had multiple rounds of communication with regulators.

On June 12, Hong Kong stocks related to Ant Financial rose collectively, among which Yunfeng Financial surged during the session, surging 54.24% in a single day.

What is a stablecoin? How much liquidity does the Hong Kong dollar stablecoin have? Why do financial institutions and technology companies enter the market? What are the pain points of the industry?

1:1 asset backing

For a long time, the large price fluctuations of virtual assets have been criticized by the market. However, since stablecoins are anchored to specific assets, their prices are relatively stable and they are easier to accumulate value trust.

According to the Stablecoin Ordinance (hereinafter referred to as the "Ordinance") published in the Gazette by the Government of the Hong Kong Special Administrative Region of China on May 30, the meaning of stablecoin must meet the requirements of "maintaining a stable value by reference to one of the following - a single asset; a group or basket of assets."

Hong Kong has also specifically defined the concept of "specified stablecoins", which refers to stablecoins that maintain stable value by reference to one or more official currencies; one or more units of calculation specified by the Hong Kong Monetary Authority (hereinafter referred to as "HKMA"); one or more forms of storage of economic value specified by the HKMA; or a combination of the above.

The most familiar stablecoin is Tether (USDT), which is pegged to the US dollar. Tether says that all Tethers are pegged 1:1 to the corresponding fiat currency (for example, 1USDT = 1 USD) and are 100% backed by Tether's reserves.

In order to ensure the true stability of stablecoins, the United States, the United Kingdom, the European Union, Hong Kong, China, Singapore, and other countries have set strict requirements for the reserve assets of stablecoins.

The Hong Kong Regulations clearly state that the market value of the reserve asset portfolio must at any time be at least equal to the face value of the specified stablecoins that have not been redeemed and are still in circulation, and the licensee's reserve assets must be of high quality, high liquidity and have the lowest investment risk.

The United States is currently promoting the "Guidance and Establishment of a National Stablecoin Innovation Act" (hereinafter referred to as the "Genius Act"), which requires that in order to issue a payment stablecoin, the issuer's outstanding stablecoins must be supported by at least a 1:1 ratio of reserve assets. These reserve assets include U.S. dollar cash, U.S. Treasury bonds maturing within 93 days, etc.

In accordance with the 2020 Digital Finance Strategy, the European Union launched the Crypto-Assets Market Regulation (MiCA), in which the rules on asset-referenced tokens and electronic money tokens (both of which are stablecoins) will come into effect on June 30, 2024.

The Monetary Authority of Singapore issued stablecoin regulations on August 15, 2023. The new regulatory framework applies to any single-currency stablecoin issued in Singapore and pegged to the Singapore dollar or any G10 currency. Reserve assets include cash, cash equivalents and bonds maturing within three months denominated in the pegged currency.

On May 28, 2025, the UK Financial Conduct Authority (FCA) issued a consultation document suggesting that issuers must ensure that all stablecoins in circulation are backed 1:1 by a low-risk, liquid asset pool.

Jeffrey Ding, chief analyst at HashKey Group, told Interface News that the purpose of setting a 1:1 peg is essentially to ensure that the stablecoins held by users are backed by real assets to avoid the risk of "idle finance" or bank runs.

"A 1:1 peg means that each unit of stablecoin corresponds to one unit of real assets of equal value, so that investors and users can have the confidence to hold, use, or even trade such assets in large amounts, thus avoiding a crisis of trust. If the reserves are not fully covered, the stablecoin's 'face value redemption' commitment will become invalid, which will not be conducive to financial institutions or users quickly exchanging it for legal tender when needed, affecting circulation and settlement functions." Jeffrey Ding emphasized.

There is a view in the market that the United States intends to build a "digital Bretton Woods system" by linking stablecoins to U.S. Treasury bonds.

Deng Jianpeng, professor at the School of Law of the Central University of Finance and Economics and director of the Financial Technology Rule of Law Research Center, told Jiemian News reporters, "For the United States, since 90% of stablecoins are currently pegged to the US dollar, it has its own interests in introducing regulatory laws and regulations. For example, the reserve requirements for stablecoins are US dollar cash, US Treasury bonds, etc., which also means that the issuers of US dollar stablecoins will buy a large amount of US Treasury bonds and become major buyers of US Treasury bonds."

The Standard Chartered report believes that US legislation on stablecoins is expected to be introduced soon, and the Genius Act is likely to be passed in the summer, which will help increase the total supply of stablecoins from the current US$230 billion to US$2 trillion by the end of 2028. Stablecoins require reserves, and the increase in supply is expected to bring US$1.6 trillion in new demand for US short-term Treasury bonds.

Find application scenarios

The Standard Chartered report pointed out that the current total size of stablecoins is about US$230 billion. The first and second largest stablecoins are USDT issued by Tether and USDC issued by Circle, with market shares of 63% and 25% respectively.

In order to get a share of the stablecoin market, Hong Kong has accelerated the relevant process. In March 2024, the Hong Kong Monetary Authority launched the "Sandbox" for stablecoin issuers, providing a test environment for institutions that intend to issue legal currency stablecoins in Hong Kong; on May 21, 2025, the Hong Kong Legislative Council passed the "Stablecoin Bill" to establish a licensing system for legal currency stablecoin issuers in Hong Kong; on May 30, 2025, the "Bill" was published in the Gazette and took effect; on August 1, 2025, the "Bill" will be implemented.

For Hong Kong, which is actively striving to become an international virtual asset center, entering the stablecoin market is an expected move.

"Hong Kong strives to become an international financial center, including becoming an innovation center for WEB3. The issuance of Hong Kong dollar stablecoins, or the issuance of regulated stablecoins pegged to other legal currencies in Hong Kong, will be of great significance to enhancing Hong Kong's status as an international financial center," said Deng Jianpeng.

However, due to the obvious disadvantage in market share, the development prospects of Hong Kong dollar stablecoins remain to be seen. "Today, the stablecoin market is still an oligopoly, with stablecoins pegged to the US dollar accounting for the majority, and Tether's stablecoins account for the majority of them. Therefore, for a stablecoin pegged to a non-US dollar, in addition to regulatory permission, the most important thing is whether it can find application scenarios and expand the actual role and market share of non-US dollar stablecoins." Jeffrey Ding said.

"The Hong Kong dollar stablecoin is anchored to the Hong Kong dollar, which itself has a relatively small market value. From a scenario perspective, the main use scenario of stablecoins is currently in the field of cryptocurrency investment and trading. Although Hong Kong already has regulated cryptocurrency exchanges and virtual asset ETFs, the overall trading volume is still relatively small. Therefore, in the short term, the Hong Kong dollar stablecoin may maintain a certain size, but this size will not be too large," Deng Jianpeng believes.

"Of course, the application scenarios can develop from virtual currency transactions to cross-border payments. Since Hong Kong itself is an important financial center and service trade fulcrum, there should be a great demand for cross-border payments," Deng Jianpeng added.

OSL Chief Business Officer Eugene Zhang said in a recent media interview, "OSL supports enterprises to make cross-border payments through stablecoins. The advantage is that it can shorten the payment time. If I want to remit money from South America to Hong Kong today, if I go through a bank, I think it will take at least 3-5 working days, because there are many transit banks involved, and stablecoins can achieve T+0. In terms of cost, the cross-border remittance cost of stablecoins is also lower than that of traditional financial institutions."

For stablecoins issued in Hong Kong, it is also necessary to choose cross-border scenarios.

"I think stablecoins must be cross-border and cannot be used only in Hong Kong, otherwise their value may not be that great," said Zhang Yinghua.

Of course, it is a long-term project to open up cross-border transactions on and off the chain. "This not only involves the regulatory approval of various countries and regions, but also involves the future financial infrastructure. As a cryptocurrency trading platform, we will also work hard to promote communication among all parties," Zhang Yinghua emphasized.

Many competitors

Stablecoins are coming, and related institutions are also accelerating their actions.

In February this year, Standard Chartered Hong Kong, Anshun Group and Hong Kong Telecom reached an agreement to establish a joint venture, hoping to apply for a license from the Hong Kong Monetary Authority under the new regulatory system to issue stablecoins pegged to the Hong Kong dollar.

"We are stepping up relevant preparatory work and will announce more details in due course," Dominic Maffei, head of digital assets and fintech at Standard Chartered Hong Kong, said recently.

It is worth noting that stablecoins themselves have generated an incremental financial space. On June 5, digital currency giant Circle was listed on the New York Stock Exchange in the United States, becoming the "first stablecoin stock" with an opening price of $69 per share. As of the close of the U.S. stock market on June 12, Circle's stock price had risen to $106.54 per share, with a total market value of $23.7 billion.

"I think the development prospects of stablecoins are very promising. In addition to Circle, which has just been listed in the United States, and the stablecoin giant Tether, I believe that companies from China, Europe, South America and other places will also join in. The future is very promising." Deng Jianpeng said.

Large companies have responded even faster. As mentioned earlier, Ant International and Ant Digits have already taken action on stablecoin licenses.

"In fact, Ant Digits participated in the Ensemble regulatory sandbox of the Hong Kong Monetary Authority as early as August last year, mainly promoting the RWA (tokenization of real assets) projects of physical assets such as new energy charging piles. As the parent company of Alipay, Ant Group's application for a Hong Kong stablecoin license is aimed at strengthening its blockchain technology layout and further serving its cross-border payment and fund management business." said Jeffrey Ding.

From the perspective of global competition, "Ant International positions itself as a competitor to international payment giants such as Stripe, PayPal, Visa, and MasterCard, all of which have already been involved in stablecoin issuance. As one of the first companies to publicly announce plans to apply for a Hong Kong stablecoin issuance license, Ant International has significant first-mover advantages with its strong fund management capabilities and global financial technology background." said Jeffrey Ding.

In comparison, in August 2023, global payment giant PayPal announced the launch of PayPal USD (PYUSD), a stablecoin pegged to the US dollar, which is 100% backed by US dollar deposits, short-term US Treasury bonds and similar cash equivalents, and issued by US fintech company Paxos Trust Company.

According to PayPal, customers can convert PYUSD between PayPal and compatible external wallets; use PYUSD to send person-to-person payments; choose PYUSD to pay fees at checkout; and exchange any cryptocurrency supported by PayPal for PYUSD.

In fact, while competing for the first-mover advantage, there are also considerations for asset layout. "After participating in the issuance of stablecoins, institutions can obtain the legal currency paid by stablecoin holders at a cost close to zero. At the same time, institutions can use this to purchase some low-risk investment products, such as US Treasury bonds, etc., which will generate income. In particular, the higher the issuance volume of stablecoins and the larger the base, the investment income may be very considerable." Deng Jianpeng said.

There are still many pain points

"Currently, there are relatively few laws and regulatory rules for stablecoins. In fact, popular stablecoins on the market all have compliance and financial risks," Deng Jianpeng emphasized.

Including the issue of asset stability, it was mentioned above that stablecoins will require 100% pegged reserve assets. Under this move, to what extent can the asset security of stablecoins be guaranteed?

Jeffrey Ding believes that 1:1 real-world asset pegs improve asset security, but cannot completely eliminate risks. High-security assets (such as short-term U.S. Treasury bonds, cash, and bank deposits) can be quickly converted into cash in a short period of time, greatly reducing liquidity risks. However, if the reserves are volatile assets or low-liquidity assets (such as commercial paper and tokenized securities), the risk will increase significantly, so Hong Kong, China and the United States stipulate that reserve assets must be highly liquid assets, including cash and short-term U.S. Treasury bonds.

Jeffrey Ding mentioned that both Hong Kong, China and the United States stipulate that reserve assets are held by independent, regulated custodians and are completely isolated from the issuer's own funds, which can prevent user assets from being damaged due to issuer bankruptcy or misappropriation of funds. They are also subject to third-party accounting audits or on-chain verifiable mechanisms, which can enhance transparency and public confidence and prevent false endorsements or information asymmetry.

One risk is that if there is a problem with the pegged reserve assets, the stablecoin will also have problems. In March 2023, Silicon Valley Bank in the United States declared bankruptcy due to a liquidity crisis, and Circle had $3.3 billion of its $40 billion USDC reserves in Silicon Valley Bank at the time. This caused the USDC price to plummet to around $0.87, a serious deviation from the anchor price.

The application level is even more faced with compliance issues. "In the field of cross-border payments, stablecoins have obvious advantages, both in terms of payment cost and payment efficiency, which are better than traditional financial institutions, but its challenge lies in compliance issues. The issued stablecoins and the corresponding reserve cash or other equivalents must be strictly linked. If this cannot be done, it is equivalent to over-issuance of currency or fraud, which may be a major challenge that future regulators must pay attention to." Deng Jianpeng said.

"Another challenge is anti-money laundering. Stablecoins may be exploited by hackers or used for other illegal purposes. This is also a big challenge," said Deng Jianpeng.

It is worth pointing out that there is an industry consensus that high compliance costs are also a major problem that virtual asset participants must overcome.

"Finally, for other countries that use non-US dollar or non-mainstream legal tender, or for those countries whose legal tender credit has collapsed and whose legal tender inflation is very serious, since stablecoins are very convenient to obtain and do not require bank accounts, as long as you can access the Internet, these countries will sell their own currencies and exchange them for US dollar stablecoins. This will pose a major challenge to the financial sovereignty, monetary sovereignty, and financial security of these countries," Deng Jianpeng emphasized.