Will Hong Kong choose to become an exquisite but insignificant "regulatory bonsai," or a "strategic rainforest" reshaping globalization with RWA as its engine? In our previous article, we analyzed the dichotomy of the stablecoin world: The United States, relying on "fuzzy wisdom" and market forces, allowed USDT and USDC to rapidly evolve and expand, then secured them with compliant legislation, creating the current dollar-denominated stablecoin empire. Meanwhile, Europe and Singapore, with their "perfect regulation," stifled their own nascent innovations. The lesson of history is clear and profound: in the arena of financial innovation, timing and ecosystem are far more important than perfect rules. What are the implications for Hong Kong? In May of this year, the Hong Kong Stablecoin Ordinance was passed by the Legislative Council and officially came into effect on August 1st, along with a series of guidelines and detailed rules. Global attention is now focused on Hong Kong. Does Hong Kong have the opportunity to become a new growth engine in the stablecoin sector, rather than simply serving as a regulatory benchmark like Europe and Singapore? Frankly speaking, if Hong Kong continues along its current path—pursuing a "perfect" regulatory framework, cautious market cultivation, and gradual innovative pilots—the answer is no. Hong Kong needs to recognize a harsh reality: in the current world of stablecoins, "me-too" "good kids" are doomed to fail. The success or failure of Hong Kong's stablecoin must not be viewed simply as a financial regulatory issue; it must be elevated to the level of a national digital financial strategy. Hong Kong's only way out is not to design an impeccable regulatory framework, but to devote all its efforts to building a stablecoin market with the most abundant liquidity, the richest application scenarios, and the most vitality in the world. The emerging RWA is a strategic tool for stablecoins. Hong Kong should adopt a higher-level and more innovative thinking to build a "stablecoin corridor" to seize the initiative in the stablecoin revolution and become a solid fulcrum of the national strategy, rather than a passive, defensive follower. Breaking the "Regulatory Trap": A Shift in Mindset from "Regulator" to "Market Cultivator" The greatest risk currently is that Hong Kong could inadvertently fall into a "regulatory trap." This seemingly responsible but actually fatal mindset attempts to foresee and eliminate all risks through exhaustive rules. The result, as exemplified by Europe's MiCA legislation, is the creation of an "exquisite shell"—perfect institutions but a withered market. Compared to Europe and Singapore, Hong Kong's unique landscape gives it the potential for transcendence. The development of stablecoins in Hong Kong shouldn't be limited to a local regulatory experiment. Hong Kong regulators must undergo a profound shift in mindset: from "financial regulators" to "market incubators." The goal of regulation shouldn't be to prevent problems but to achieve results—to foster a thriving ecosystem while maintaining financial security. This means regulation itself needs to become a service, with core KPIs (key performance indicators) such as the depth of market liquidity, the number of ecosystem projects, and the share of Hong Kong-issued stablecoins in global settlement, particularly RWA settlement. Stablecoins are the infrastructure that drives the digital economy, cross-border payments, and DeFi. The consequences of overregulation are obvious: SMEs and startups are excluded by high barriers to entry, creating an oligopoly and stifling diverse innovation. The separation of stablecoins from the DeFi ecosystem has marginalized Hong Kong in the Web3 wave and prevented it from integrating into the global decentralized network. A pronounced "regulatory arbitrage" effect has seen promising projects flow to more flexible jurisdictions like the US, Dubai, and Abu Dhabi, leaving Hong Kong lagging behind in the digital finance race. To address this dilemma, Hong Kong could introduce tiered and categorized regulation within existing regulations, based on scale. Large-scale, public-facing stablecoins (such as those issued by banks or tech giants) would be subject to strict capital adequacy, reserve disclosure, and risk management requirements. Small-scale, experimental stablecoins could be piloted in a "regulatory sandbox" and receive exemptions or lenient treatment. Functional categorization: Payment-oriented stablecoins emphasize reliability; investment-oriented or experimental stablecoins prioritize disclosure and protection, rather than blanket prohibition. A phased approach: Startups will begin in a sandbox, gradually moving toward full regulation as they scale, to avoid a one-size-fits-all approach that stifles emerging players. Furthermore, there's room for bold exploration in innovation: regularizing the sandbox to allow stablecoin issuance platforms to rapidly iterate; implementing flexible real-name systems, such as simplified verification for small transactions; accommodating DeFi and developing "compliant packaging" solutions to ensure Hong Kong stablecoins are both compliant and circulated within global protocols. These measures transform regulation into services, promoting Hong Kong's transformation from a "regulator" to a "market incubator." Building a Strategic Ecosystem: Reliable Access Authorization (RWA) Regarding stablecoin application scenarios, the primary breakthrough for Hong Kong's stablecoins is the development of a strategic application market—RWA. Compared to Europe and Singapore, Hong Kong's biggest difference lies in its proximity to China, the world's largest manufacturing and trading nation. In 2024, China's total foreign trade exceeded $6.3 trillion, ranking first in the world for many consecutive years. Hong Kong's unique advantage lies in its role as a "super connector": it can connect with China's vast real economy and integrate into global capital markets. This card is destined to be played through "real-world assets" (RWAs). The success of the US dollar stablecoin is based on the trading of virtual assets. The opportunity for Hong Kong's stablecoin lies in the digitization of real assets. Imagine this scenario: a Dongguan factory exports a batch of goods worth $5 million to Brazil. The traditional process relies on US dollar letters of credit, SWIFT messaging, and multiple intermediary banks, and it often takes two to three weeks for the funds to arrive. However, under Hong Kong's RWA+stablecoin model, this receivable can be quickly tokenized into RWA tokens and traded on the global market. The factory receives immediate funding, while investors receive short-term annualized returns of 5%-7%. The entire transaction is completed using Hong Kong's compliant stablecoin, offering significant efficiency, transparency, and cost advantages. This model not only improves financing efficiency but also reshapes the global financial landscape. For China's real economy, it is a powerful tool for reducing financial costs and enhancing international competitiveness. For the internationalization of the RMB, it creates demand for non-speculative stablecoins. For Hong Kong, it presents a strategic opportunity to become a core hub for a new generation of digital financial infrastructure. Under Hong Kong's new RWA+stablecoin model, the receivables from this transaction are tokenized into an RWA token on a compliant Hong Kong platform. The Dongguan factory no longer needs to wait; it can immediately sell the RWA token on the secondary market to global investors—for example, a Dubai-based family office seeking short-term, high-quality returns—and instantly secure funds. The entire transaction, from the issuance and trading of the RWA to the final payment by the Brazilian buyer, is completed using Hong Kong-issued offshore RMB, Hong Kong dollars, and even Hong Kong-regulated USD stablecoins. Stablecoins here serve not as a speculative tool but as an efficient settlement layer. The strategic significance of this model is game-changing. For China's real economy, it provides millions of exporting companies with unprecedented financing efficiency and liquidity, significantly reducing financial costs and enhancing international competitiveness. Contributing to the country's "de-dollarization" strategy, it creates strong, non-speculative demand for offshore RMB stablecoins. Brazilian buyers and Dubai investors use the CNH stablecoin not for political or speculative reasons, but because it provides access to a more efficient and profitable trade finance market. This represents a natural replacement of the US dollar's settlement role with a "better-to-use" tool at the business level. For Hong Kong, it will no longer be a follower in the stablecoin space, but a rule-maker and core hub for a new generation of digital financial infrastructure. Global trade assets will converge here for tokenization and trading. Trade finance is just the starting point. Chinese infrastructure projects (such as Belt and Road Bonds), green energy projects and carbon credits, commercial real estate in the Greater Bay Area, and even compliant assets from other countries and regions can all become digital assets accessible to global investors through Hong Kong's RWA platform. The underlying foundation of all this will be Hong Kong's compliant stablecoins. Building a "Hong Kong Stablecoin Corridor" Through policy guidance, reasonable regulation, and the promotion of innovation, Hong Kong can forge a "stablecoin corridor" connecting China with the global financial system and become a global hub for stablecoin innovation and cross-border settlement. This is not a narrow payment channel, but a multidimensional ecosystem: geographically connecting the mainland with the world, technologically bridging traditional and digital finance, providing a "compliance pass," and integrating real-world and digital asset liquidity. Providing stablecoin solutions at the RWA transaction layer is the most imaginative aspect of the corridor. Hong Kong is promoting the tokenization of assets such as bonds, funds, and green energy, and stablecoins are a natural settlement tool for these assets. At the same time, we will cultivate market-making funds to ensure market vitality. The first pillar is diversified currencies, with pragmatism at the core. With RWA at the core, we will pragmatically promote the development of diversified stablecoins. Offshore RMB stablecoins are a strategic core for serving trade financing; Hong Kong dollar stablecoins serve as a testing ground for financial investment and local innovation. Furthermore, we must boldly incorporate compliant US dollar stablecoins into the system as an initial "drain" to attract global liquidity and ultimately serve the RWA ecosystem. The second pillar is to embed it into specific scenarios and ignite the ecosystem. The government must take the lead and instill confidence. The Hong Kong Monetary Authority (HKMA) could allocate a symbolic 1-2% of its Exchange Fund and government fiscal reserves to fully compliant Hong Kong dollar or offshore RMB stablecoins. This move would send an unparalleled signal of confidence and serve as a stabilizing force. More importantly, it would mandate that RWA projects issued in Hong Kong must use compliant Hong Kong stablecoins for fundraising, trading, and clearing. This would deeply tie stablecoins to Hong Kong's "killer apps" and create a powerful "RWA-stablecoin" flywheel effect. Simultaneously, we must open up the payment "capillaries" by encouraging, or even requiring, local payment giants like Octopus, FPS, AlipayHK, and WeChat Pay HK to fully integrate compliant stablecoin exchange and payment functions. Only when citizens can seamlessly use stablecoins for transportation and shopping can the application ecosystem be truly established. The third pillar is regulatory innovation and dynamic flexibility. Regulation must serve the growth of RWAs. A regularized "regulatory sandbox" allows RWA issuance platforms to rapidly trial and error; tiered and categorized regulation provides appropriate space for different types of RWAs and stablecoins. Furthermore, we must actively explore "compliant packaging" solutions that allow compliant stablecoins to interact with global DeFi protocols, allowing RWA assets to gain global liquidity. Conclusion: Hong Kong's Future, China's Opportunity The global stablecoin landscape is far from settled. The United States won the first round based on cryptocurrency transactions, but the second round based on the real economy and global trade has just begun, and RWAs are the starting gun. Hong Kong faces not a technical or legal challenge, but one of resolve and vision. Should it choose to become a delicate but insignificant "regulatory bonsai," or a "strategic rainforest" that uses RWAs as its engine to reshape globalization? The answer is self-evident. Hong Kong must seize this fleeting historical window and, with reckless determination, make RWAs the absolute core of its stablecoin strategy. By dominating the global RWA market, Hong Kong will not only secure a central position in the digital financial era but also provide the strongest strategic support for the country's trade upgrades and currency internationalization. This is the only future for Hong Kong's stablecoin and its greatest contribution to the nation.
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