Hong Kong's market is surging with the imminent implementation of the Stablecoin Regulation

The trend of stablecoins continues. While the "Stablecoin Genius Bill" has been signed into law by Trump, the countdown to the launch of Hong Kong's stablecoins has begun. On August 1st, Hong Kong's Stablecoin Ordinance will officially come into effect. Compared to the massive surge in the cryptocurrency world caused by US stablecoins, the impact in Hong Kong, while minimal in the crypto world, has demonstrated a remarkable and unusually influential impact in the stock market. Since the passage of the Hong Kong Stablecoin Bill, enthusiasm for stablecoins has surged in the Hong Kong stock market. The Hong Kong stablecoin sector has seen a surge in prices, with many doubling their gains and even some showing tenfold gains. Investors are buzzing with excitement, and listed companies are celebrating with capital injections. While seemingly jubilant, Hong Kong regulators have new concerns. Recently, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, published an article on its official website titled "Stable and Long-Term Stablecoins," attempting to cool down the surging stablecoin market. However, cooling down the simmering kettle is a challenge. On May 21st, the Hong Kong Stablecoin Bill passed its third reading in the Legislative Council. At the time, with the US stablecoin bill still under Senate deliberation, Hong Kong's "jump-start" approach sparked heated market debate. While the bill's content—including a licensing system, 100% reserves, a HK$25 million paid-in capital, and anti-money laundering regulations—is largely consistent with legislation in other major jurisdictions, public opinion has nonetheless exemplified the contrasting views on stablecoins in Hong Kong. On the one hand, due to Hong Kong's waning influence in the crypto space and the numerous instances of front-running that have yielded little results, the crypto market generally maintains a relatively pessimistic view of the sector. They believe that even if Hong Kong continues to strengthen its regulatory foundation and improve its regulations, given limited market demand, it will ultimately become just another adjunct to the US dollar stablecoin, sufficient to capitalize on the residual heat of a certain window. While the crypto market is unimpressed, other markets are seeing the news as extremely positive. Following the passage of the regulations, major, discerning companies rushed to establish a presence, and traditional media and brokerages enthusiastically covered the topic, allowing stablecoins to truly break through. For a time, the discussion over the meaning, use cases, and value of stablecoins continued to ferment, gradually extending to the debate over the necessity of RMB stablecoins. The trillion-dollar stablecoin market seemed on the eve of an explosion. This Friday, the Hong Kong Stablecoin Regulations will officially come into effect, simultaneously opening up the application process for licenses. However, just a week before the effective date, Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue poured cold water on stablecoins. In his article, "Stable and Long-Term Stablecoins," he explicitly stated that stablecoins are being over-conceptualized and showing signs of becoming a bubble. He stated that initially, only a few stablecoin licenses would be issued, and urged investors to remain calm and think independently as they digest the positive market news. Meanwhile, the HKMA will solicit market feedback on the regulatory aspects of the regulations and anti-money laundering guidelines, including stricter anti-money laundering requirements to minimize the risk of stablecoins becoming a tool for money laundering. From the above remarks, it's clear that Hong Kong is concerned about the current market situation and is taking a very cautious approach to approving stablecoin issuer licenses. As for why the regulatory authorities have issued articles pouring cold water on the market, the reason is simple: stablecoins are clearly a bit overheated in Hong Kong. This overheating is particularly evident in the stock market. The bright prospects, coupled with their early stages of development, have made stablecoins a truly promising investment story. This story has led to a rapid rise in nearly all stocks associated with stablecoins, with the growth effect being almost immediate. After Guotai Junan International received a securities trading license in June, becoming the first Chinese brokerage firm to offer full-chain virtual asset services, its stock price soared 198% on June 25th, bringing its annual gain to 4.58 times. On July 7th, Jinyong Investment announced it had signed a strategic cooperation framework memorandum with AnchorX to explore potential collaboration in four areas: cross-border payments and trade, and expanding stablecoin application scenarios. The following day, Jinyong Investment's stock price surged 533.17% due to strong trading volume.

On July 15, China Sansan Media announced that the company has begun preparations for applying for a stablecoin license. On July 16, China Sansan Media closed up 72.73%, and its cumulative increase this year has reached 14.95 times.

Just one piece of news can achieve a straight-line rise, which is enough to show the strong narrative effect of stablecoins. In addition to the institutions newly joining the sector mentioned above, the original old concept stocks also took off collectively. OKLink, Yunfeng Financial, Yixin Group, Xinhuo Technology Holdings, OSL Group, etc. have all seen a cumulative increase of more than 100% this year. Even the A-shares that have been criticized for a long time have been shaken. Digital RMB concept stocks such as Hengbao Co., Ltd., Sifang Jingchuang, and Chu Tianlong have also seen multiple increases. Against this backdrop, companies seeking to capitalize on the hype, financial institutions seeking a slice of the stablecoin pie, and strategic giants seeking to reduce settlement costs and build a competitive edge have all rushed in. Caixin reports that 50 to 60 companies have expressed interest in applying for Hong Kong stablecoin licenses, including mainland Chinese state-owned enterprises, financial institutions, and internet giants. However, this surge in applications doesn't necessarily translate into a rush of approvals. The Hong Kong Monetary Authority (HKMA) has stated that most of the applicants are only at the conceptual stage and lack practical application scenarios. Those with application scenarios lack the technology and capabilities to issue stablecoins and manage various financial risks. Issuing simply for the sake of issuance is clearly undesirable in Hong Kong, and it is for this reason that the HKMA has stated that it will initially grant only a single-digit number of licenses. At the same time, to address the surge in applications, the HKMA intends to implement a preliminary screening process. Caixin cited sources as saying that the stablecoin license application process will not involve applicants downloading a form and submitting a written application. Instead, it will be arranged through a similar invitation-based system. This means that in practice, the Hong Kong Monetary Authority (HKMA), which oversees and issues licenses, will conduct preliminary discussions with prospective stablecoin license applicants to determine whether they meet the basic eligibility requirements. Only after receiving a preliminary approval will the HKMA issue the application form. As for who will receive the license, market opinion suggests that prospective issuers already participating in the stablecoin sandbox pilot program appear to have a greater chance of success. As early as July of last year, the HKMA launched the stablecoin sandbox testing program, with institutions such as JD CoinChain Technology, Yuanbi Innovation Technology, and the Standard Chartered Consortium (comprising Standard Chartered, Anmi Group, and Hong Kong Telecom) selected. The sandbox testing has now entered its second phase. While the HKMA emphasizes that sandbox selection does not guarantee the granting of licenses, and that sandbox companies must apply for licenses according to regulations, sandbox participants clearly have more experience and understanding of how to meet regulatory requirements, given the application scenarios and risk control foundations tested in the sandbox. Overall, Hong Kong prioritizes three key aspects in license applications: technical implementation capabilities, assessing whether the issuance technology requirements are met; application scenario requirements, assessing the need for practical solutions and implementation scenarios; and risk control capabilities, particularly the need to prevent money laundering risks associated with stablecoins. Objectively speaking, large enterprises with extensive cross-border financial and payment business foundations and comprehensive risk control systems have an advantage. Small and medium-sized enterprises have a very slim chance of success in their applications, and are more likely to play a supporting role. At this stage, despite the HKMA's calls for a cooling of the market, the market's fear of missing out (FOMO) is unlikely to subside anytime soon. First, there is a certain linkage between the development of US stablecoins and Hong Kong. Following the passage of the Genius Act, the enthusiasm for US stablecoins remains unabated, with Circle reaching new highs and large institutions expressing strong interest. Coupled with the positive sentiment in the crypto market and the expected interest rate cuts, the US stablecoin narrative will continue to thrive, and this narrative will have a transmission effect. Second, the discussion on stablecoins in Hong Kong continues to expand. Initially, the market focused solely on the Hong Kong dollar stablecoin itself. However, more recent discussions are focusing on the necessity of an offshore RMB stablecoin. National think tanks such as the National Financial Development Research Office, local governments like the Shanghai State-owned Assets Supervision and Administration Commission, major securities firms and consulting firms, and social organizations have all begun to address this topic. Currently, many believe that an offshore RMB stablecoin should be piloted in the Hong Kong market, and once conditions are ripe, further exploration should be conducted in domestic offshore markets, particularly in pilot free trade zones. Previously, the slow development of Web3 in Hong Kong was primarily due to limited access. If an offshore RMB stablecoin proves viable, it would not only open up new possibilities for this sector and boost its own development, but would also have a profound long-term impact on the existing financial system. More importantly, for participants, stablecoins represent a lucrative and potentially viable market, with a comprehensive industry chain gradually forming. From the issuer's perspective, for retail issuers, stablecoins can significantly reduce transaction settlement costs and enhance competitiveness. For payment issuers, they also have the ambition to penetrate the digital asset market through intermediaries and move towards global financial infrastructure. Even if it's simply to enhance stock prices and generate capital narratives, some participants are motivated to participate. Recently, with the concept trending, over five groups, including ZhongAn Online, 4Paradigm, Jiami Technology, and Yisou Technology, have announced large-scale share placements. OSL Group has placed over 101 million shares at a price of HK$14.9 per share, raising nearly HK$2.4 billion. Beyond issuance, virtual asset trading platforms, the primary providers of traffic monetization, and custodians, primarily banks, are actively developing strategies, aiming to capitalize on the industry's dividends through expansion. Based on these factors, the hype around stablecoins will continue in the near term. Competition for licenses, the key to success in this regulatory compliance race, is also expected to intensify. However, it's worth noting that as an industry in its early stages, the scope of the license, the strength of its impact, and even the feasibility of the business needs still require careful consideration. Considering the hard threshold of HK$25 million and the potential annual compliance costs exceeding one million, a hasty application without a strong business model could be counterproductive. As the Hong Kong Monetary Authority noted, only a minority of companies achieve long-term success, while many more companies, simply seeking to capitalize on the hype, are inevitably reduced to their original form after obtaining a license. Investors closely watching stocks should therefore exercise caution.