Written by: Will Awang

After failing to deliver on its promise last month, the Hong Kong Monetary Authority has finally issued its first batch of stablecoin licenses to HSBC and Standard Chartered, consistent with our previous analysis in the article "Hong Kong Dollar Stablecoins Do Not Need to Become USDC".

Although the result itself was not surprising, it was still disappointing.

I've been reading Professor Jiang Xueqin's book on geopolitical game theory lately, and Rain also wrote an article titled "Hong Kong Stablecoin: A Carefully Designed 'Open Conspiracy'." With these two events overlapping, I want to try to take a "wild" look at this deal from a game theory perspective, hoping to amuse everyone.

Jiang Xueqin analyzes Trump's logic regarding the Iran war as follows: On the surface, the war was a foolish blunder. But if we use game theory to change the assumption—that Trump actually wanted this "failure"—then he might be a genius.

This article applies the same framework to Hong Kong stablecoins to hypothesize a top-level "open conspiracy".

I. A list that disappoints everyone

The first batch of stablecoin licenses issued by the Hong Kong Monetary Authority yesterday is the version the market least wanted to see:

Standard Chartered and HSBC were absent; Bank of China (Hong Kong) was not.

This result is disappointing. Foreign banks have no inherent interest in developing Hong Kong dollar stablecoins, while strategically driven entities like Bank of China (Hong Kong) have been sidelined. Key stakeholders—securities firms, exchanges, and internet companies—have been systematically excluded from the legislative consultation stage.

With the first batch of licenses issued, the narrative of Hong Kong's stablecoins has been given a "suspended death sentence."

But if you were HKMA, would you make such a list?

You have complete experience from the 2024 Project Ensemble sandbox, you have seen all the cases of digital yuan from project initiation to promotion, and you have the natural advantage of the SFC + HKMA dual-track system—and then you select a list of projects that can't even run the most basic business loop.

Unless, of course, this disappointing list was never intended to please the market.

Second, a reverse reasoning: What if the initial assumption was wrong?

To understand this list, a different framework is needed.

I've been reading Jiang Xueqin's game theory series lately. In the episode he aired on April 2nd, which discussed Trump's Iran war, one passage particularly stuck with me:

"I understand Donald Trump's an idiot. I understand that he's going to lose his war in the Middle East. But let's put our thinking caps on. Let's use game theory and say — what if for some strange reason Donald Trump wants to lose his war in Iran? Then he'd be a genius."

— Professor Jiang, Game Theory#18, April 2, 2026

Jiang Xueqin's argument is simple: if you assume Trump wants to "win," then every step he takes is so stupid as to be inexplicable. But if you assume the opposite—that he wants to "lose the war," using a controlled collapse of the Middle East to shift global energy dependence to North America—all the seemingly idiotic actions immediately become a self-consistent strategy.

This is called managed collapse. It's not about avoiding failure, but about creating a failure that benefits you.

Looking back, if you assume that the goal of this licensing process is to "expand the Hong Kong dollar stablecoin industry," then every detail is not necessarily explainable—issuing licenses to the least motivated institutions, setting thresholds so high that they are not commercially viable, repeatedly challenging applicants' business logic, and excluding the most strategically driven entities.

But what if we change the assumption—that the purpose of this licensing was not to support the "commercial stablecoin industry" itself?

Then everything becomes self-consistent.

Following this assumption, the three lines of scenario, institution, and infrastructure all match up.

III. Scenario Level: Three False Propositions

Each applicant tells three stories: cross-border payments, RWA, and consumer spending.

However, none of the three could stand.

A. Cross-border payments are a false proposition.

A typical transaction involves a company in country A using fiat currency (mint) to exchange for stablecoin A on the secondary market, then exchanging the stablecoin B for stablecoin B to pay a company in country B. The company in country B then redeems the stablecoin B. Essentially, this allows banks to reduce costs in foreign exchange transactions through Web3 exchanges – a logically sound approach to financial inclusion for SMEs.

However, in this chain, the lifespan of a stablecoin is only the moment of the transaction.

If a company in country B receives stablecoins, it will still need to redeem them unless it immediately completes another trade transaction, requiring fiat currency. What you need is not a one-time transfer, but a closed loop where there is always a "next buyer."

Rain points out a crucial point—and even more critically, the Fisher equation: MV = PT, where money supply multiplied by velocity of money equals price multiplied by social output. On-chain stablecoins have a velocity of money that is an order of magnitude higher than traditional bank clearing.

This means that the amount of stablecoin reserves needed to support the same volume of trade is actually less. The more successful cross-border payments are, the lower the demand for stablecoin reserves.

This is not a closed loop, it's an anti-closed loop.

B. RWA is a false proposition.

The essence of RWA is the same thing: the tokenization of asset shares.

The funds raised are for stablecoins, but after the asset manager gets the stablecoins, he needs to buy the underlying assets. However, the asset sellers almost never accept stablecoins—they do asset securitization in order to exit or optimize cash flow, and no one wants to take stablecoins.

The result is that the lifecycle of stablecoins in the RWA scenario is only the fundraising period.

C. Consumer-facing (C-end) consumption

In short: Hong Kong's retail market is too small to even mention.

All three stories are false propositions. And the HKMA, as the regulator that followed the entire process, knows this better than any applicant.

Then why does it still need to deal cards?

IV. Institutional Level: A "Voluntary" List

Neither HSBC nor Standard Chartered came with a strategic will.

HSBC's participation in the application process was likely a passive one. This makes sense—HSBC's strategic focus has long since shifted away from stablecoins; it's truly pushing tokenized deposits. For HSBC, applying for a Hong Kong dollar stablecoin is more of a defensive move than a proactive strategy.

Standard Chartered has some initiative, but for it, Hong Kong is just one node in its global strategy. The HKD stablecoin can be integrated into its Libera platform, but Hong Kong has never been its primary battleground.

The Bank of China (Hong Kong) that truly has the will and a local context is absent.

Is it strange? Not at all. As long as you understand that the Hong Kong government is designing a mechanism that makes "voluntary" the optimal choice:

Rule number one: Licenses are only issued to note-issuing banks.

This immediately created an exclusive club. If HSBC doesn't apply, it means that Standard Chartered will be the only name on the future digital Hong Kong dollar track. For an institution that considers "the issuing bank of the Hong Kong dollar" as its core brand asset for 160 years, this is an unbearable symbolic loss. Therefore, HSBC must follow suit.

Rule Two: Extremely High Technical and Compliance Thresholds

Building a multi-million dollar HSM data center, implementing anti-money laundering architecture, on-chain monitoring, and a reserve asset pool—this entire setup turns issuing stablecoins into a pure cost investment, not a business. Normal commercial institutions would exit after calculating the ROI. But HSBC and Standard Chartered can't—the first rule has already locked them out.

They are not here to make money, but to avoid losing their seats.

The third rule: Repeatedly challenge business logic.

This is the most ingenious point. During the interview stage, the Hong Kong government repeatedly asks applicants the same question: Why do you want to issue your own documents instead of using someone else's? This is tantamount to clearly telling applicants beforehand—I don't care if you can make money. And the applicants who are selected can only answer one thing: "I can help Hong Kong get this infrastructure running."

With these three rules combined, the Hong Kong government didn't actually force anything.

HSBC and Standard Chartered applied "voluntarily," invested tens of millions of US dollars "voluntarily," and "voluntarily" bore the costs of user education and scenario development. However, each of their "voluntary" choices was the optimal choice under the rules set by the Hong Kong government.

This is not an order, it is a design.

The absence of Bank of China (Hong Kong) is therefore not surprising—the most strategically driven entity is ironically ill-suited to be an infrastructure contractor. Entities with strong strategic vision will develop stablecoins into their own commercial products, with their own pace and objectives. The Hong Kong government doesn't want commercial products; it wants infrastructure.

Moreover, Bank of China was already on a different track.

V. Infrastructure Level: Leveraging the momentum to push forward something that was otherwise impossible.

What HKMA really wants to do is e-HKD.

e-HKD is the Hong Kong government's digital currency—the Hong Kong version of the digital yuan. The goal is clear: to gradually migrate interbank clearing and mass retail payments to the on-chain Hong Kong dollar issued by the central bank. This is the next-generation financial infrastructure that the Hong Kong government has been promoting for the past few years, and it represents the culmination of the entire strategy.

The Project Ensemble sandbox in 2024 was e-HKD's first attempt at a consortium blockchain: banks and the Hong Kong government jointly maintained the blockchain, tokenized deposits, and restructured interbank clearing and settlement. The technology worked, but things stalled—only HSBC and Standard Chartered were willing to join, while small and medium-sized banks lacked the motivation.

The reason it's not gaining traction isn't technology, but a lack of demand-side momentum. User education costs, scenario development costs, and technology trial-and-error costs—nobody's willing to pay for these three things.

The most recent example is Hong Kong. In May 2024, the digital yuan was officially integrated into Hong Kong's Faster Payment System (FPS), becoming the world's first bilateral interconnection of "central bank digital currency + fast payment system". Two years later, by March 2026, there were approximately 80,000 digital yuan wallets in Hong Kong, with 5,200 merchants connected and 18 local banks participating in top-ups—for a market of 7.5 million people, this is far from being considered a "widespread" figure.

In their daily lives, Hong Kong residents actually use Alipay HK, WeChat Pay HK, and the Faster Payment System (FPS) itself.

Returning to the question from Section 4: Why is Bank of China (Hong Kong) absent from the stablecoin list? Bank of China (Hong Kong) is the main institution driving the rollout of the digital yuan in Hong Kong. In October 2025, Bank of China (Hong Kong) partnered with Circle K and FreshUp, enabling over 380 convenience stores and 1200 vending machines across Hong Kong to support digital yuan payments.

In other words, Bank of China's strategic focus has always been on the digital yuan. Its absence from the list of stablecoins is not due to exclusion, but rather because it is already engaged in something more direct.

The Hong Kong government clearly understands that e-HKD will never be successfully launched if it relies solely on itself. This is why stablecoins have become so popular.

Stablecoins have provided the Hong Kong government with something it could never create on its own: free demand-side momentum. Popularity, media attention, KOLs, venture capital, global narratives—all free. The rest follows naturally.

Phase 1: Enabling licensed banks to use the narrative of "commercial stablecoins" to attract users, develop scenarios, and implement technologies. HSBC and Standard Chartered self-funded the construction of HSM data centers, conducted KYC/AML, educated the public on the use of on-chain Hong Kong dollars, persuaded merchants to adopt the technology, and successfully implemented cross-border B2B scenarios—all of these were things e-HKD originally wanted to do but couldn't accomplish.

Phase Two: Once user habits, clearing habits, and the technology stack are established, the Hong Kong government launches its own clearing layer as an essential path for interbank clearing and settlement, and licensed stablecoins are incorporated into this track in the clearing process; later, e-HKD is launched as the native asset, and licensed stablecoins gradually become the "upper layer encapsulation" of e-HKD.

The brand, wallet, and interface that users see remain unchanged, but the underlying clearing has been completed from commercial banks to the central bank.

This approach corresponds almost 1:1 to the "two-tier operation" architecture of the digital yuan: the directly participating banks are in the front end, and the central bank is in the back end.

Same framework, two different paths. The only difference is that China pushed it from the top down, while Hong Kong pushed it from the bottom up by leveraging existing momentum.

The Hong Kong government should use the stablecoin ordinance to promote e-HKD, instead of using e-HKD to promote e-HKD itself.

VI. From a global financial center to Hong Kong dollar clearing sovereignty

Hong Kong's core assets are currently depreciating.

Hong Kong's status as an international financial center over the past few decades has essentially been built on one thing: access to the US dollar clearing system. Equity financing, interbank lending, trade settlement, and private banking are all based on this.

However, this asset is currently weakening on three fronts simultaneously: the politicization of the dollar system itself has made access rights uncertain, the sluggish return of Chinese concept stocks has weakened the primary market, and geopolitical conflicts have made the cost of traditional correspondent banking channels increasingly higher.

The competition for the next generation of international financial centers will no longer be about who has the largest stock market or the most private banking funds, but about who controls the next generation of financial infrastructure and clearing sovereignty.

The US is using the GENIUS Act to integrate stablecoins into the dollar clearing system, making USDC a digital extension of the dollar. Europe is using MiCA to turn EMT into a digital version of euro clearing. China is using the digital yuan to restructure cross-border RMB clearing.

The three major currency zones are all doing the same thing: removing the clearing sovereignty of their own currencies from the correspondent banking structure of the SWIFT era and putting it into their own CBDC or stablecoin structures.

Hong Kong lacks monetary sovereignty—under the linked exchange rate system, the issuance of the Hong Kong dollar is inherently dependent on the US dollar. However, Hong Kong can fight for clearing sovereignty: to ensure that Hong Kong dollar clearing no longer relies entirely on traditional SWIFT and correspondent banks, but is instead built on a next-generation infrastructure controlled by the HKMA.

Looking at the dealing from this perspective again, everything makes sense:

The narrative of "commercial stablecoins" has never been an end in itself, but rather a tool.
HSBC and Standard Chartered's goal is to help the Hong Kong government educate users and ensure the smooth operation of various scenarios.
The absence of Bank of China (Hong Kong) is not an oversight, but rather a way to keep the strategic intent low-key.
VAOTC may never truly come to fruition because the historical mission of cryptocurrency trading has already been accomplished.

This is a controlled narrative downgrade—to consume the superficial popularity of Web3 and to establish the underlying sovereignty of reckoning.

As Jiang Xueqin said, failure is the point.

The key question is who designed this "failure" and who actually takes something from it.

VII. In Conclusion

Does Hong Kong have Web3? Thinking back on our tumultuous years, it seems so. But from a historical perspective, it may never have.

The question we need to consider is, what's left after Web3 has been distilled?

In fact, Hong Kong has never needed Web3—what Hong Kong needs is a ticket to become the next generation of financial center.

And the first batch of licensed stablecoin institutions are paying for this entry ticket.

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