Ant Group suspends stablecoin plan. Where will Hong Kong's stablecoin policy go?

On August 1st of this year, Hong Kong officially implemented the Stablecoin Ordinance. Public data shows that as of September 30th, 36 institutions had submitted applications, and the market expects the first batch of licenses to be announced in the first quarter of next year. However, yesterday, the Financial Times, citing sources familiar with the matter, reported that several mainland companies, including Ant and JD.com, had suspended their stablecoin plans after receiving instructions from regulatory authorities such as the People's Bank of China and the Cyberspace Administration of China not to proceed. This move reflects continued regulatory concerns about private companies developing stablecoin businesses. After the news broke, some friends asked for my opinion, expressing concern about whether Hong Kong's stablecoin policy would be hindered. I've been following relevant policy developments in Hong Kong recently and have become quite interested in this matter. I've delved into the details of the incident and would like to share some analysis to provide some peace of mind. Hong Kong's stablecoin policy is not expected to be materially affected. The full report cites warnings from central bank officials: any form of "currency" issued by technology companies or securities firms could undermine the central bank's monetary sovereignty, and privately issued stablecoins would be seen as a challenge to the central bank-led digital renminbi (e-CNY) project. The key point is clear: these halted stablecoin projects were all pegged to the RMB or offshore RMB, which conflicts with the People's Bank of China's multi-year digital RMB strategy. The digital RMB pilot program has been running for several years, and I have registered to use it, but its current support scenarios remain limited. The People's Bank of China's regulatory action is essentially due to the high overlap in business scenarios between RMB-based stablecoins (whether onshore or offshore) and the digital RMB. The core application of both is to replace cash (M0) for cross-border business settlement. In other words, regulation only blocks the development of the CNY stablecoin in Hong Kong and does not affect the application of other types of stablecoins. Which stablecoins are more likely to be approved in Hong Kong? This needs to be understood in conjunction with my previous article on the Hong Kong RWA. Currently, the application prospects for stablecoins based on US dollars, bonds, and funds are the most promising. In particular, interest-bearing assets such as US Treasury bonds and US dollar money market funds are expected to have a higher approval rate than other monetary assets. This assessment is based on the issuance mechanism of the Hong Kong dollar. Hong Kong currently has three note-issuing banks: HSBC, Standard Chartered Bank, and Bank of China (Hong Kong). When these banks issue Hong Kong dollar banknotes, they must pay the equivalent amount of US dollars to the Hong Kong Monetary Authority at a fixed exchange rate and obtain a "Certificate of Indebtedness" before they can print the banknotes. This means that every Hong Kong dollar banknote is 100% backed by US dollar reserves. Hong Kong is naturally receptive to dollar-denominated assets, and the relevant pathways are mature and well-proven. I expect this type of stablecoin to have a higher approval rate and may even receive approval sooner. Hong Kong's financial system may be moving toward a dual-track system. Historically, Hong Kong's mechanism for issuing Hong Kong dollars based on US dollars stems from its position as an international financial center, with outward-oriented trade and financial transactions largely denominated and settled in US dollars. However, with Sino-US financial and trade frictions intensifying in 2025, the People's Bank of China's halt to the issuance of the RMB stablecoin may reflect deeper strategic considerations. In my opinion, the greater value of the digital RMB lies in promoting its internationalization, and Hong Kong is highly likely to become a key platform for its promotion. The future Hong Kong dollar issuance mechanism may adopt a new "dual-track" structure—maintaining the existing 100% US dollar reserve while gradually increasing the proportion of assets such as the digital RMB to form a more diversified reserve structure.