By 2025, the global digital economy will enter a critical juncture of profound transformation. As a bridge connecting traditional finance and the blockchain ecosystem, stablecoins have grown into a massive market exceeding $271.4 billion by August 2025, becoming an indispensable infrastructure for crypto asset trading, cross-border payments, and decentralized finance (DeFi). Fiat-collateralized stablecoins, particularly USDT and USDC, are widely considered a "safe haven" in the crypto world due to their price peg to the US dollar and their claim of "1:1 redemption." However, beneath this luster lies hidden risks that should not be ignored. Recently, major financial centers around the world have implemented a flurry of regulatory policies. Hong Kong's Stablecoin Ordinance came into effect on August 1, 2025, the EU's Markets in Crypto-Assets Directive (MiCA) entered full implementation, and the US's GENIUS Act officially came into effect on July 18, 2025. This marks the end of the era of unchecked growth in stablecoins and the beginning of a new phase of global regulation focused on compliance, prudence, and transparency. This article will provide an in-depth analysis of the true landscape of stablecoins from three perspectives: risk disclosure, the latest regulatory developments, and future trends. I. Risks of Stablecoins: The Hidden Concerns Behind Their Halo The word "stability" (or "stability") is the core of stablecoins' market appeal, but it is also their greatest illusion. While enjoying its convenience, investors must be aware of the multiple risks inherent in it. 1. Centralization Risk: The Fragile Foundation of Trust The operating logic of fiat-collateralized stablecoins (such as USDT and USDC) is built on trust—trust that the issuer holds sufficient US dollar reserves, trust that its asset allocation is sound, and trust that its audit mechanism is effective. However, this trust is inherently centralized, relying on the self-regulation of private companies and the credibility of external audits, rather than technical or mathematical certainty. Taking USDT, the world's largest stablecoin by market capitalization, as an example, its issuer, Tether, has long been criticized for its opaque reserve assets. Although it has shifted its focus to holding primarily US Treasuries, historical data shows that it has invested heavily in high-risk assets such as commercial paper, gold, and even Bitcoin. This "high-yield" strategy carries potential credit risk and market volatility. In 2021, Tether was fined $41 million by the US Commodity Futures Trading Commission (CFTC) for failing to report significant losses, exposing flaws in its governance and disclosure mechanisms. Although USDC touts its transparency and compliance, during the 2023 Silicon Valley Bank (SVB) crisis, as much as 80% of its reserve assets were held there, causing its price to deviate significantly, dropping to $0.85. Although it ultimately recovered through external bailouts, the incident clearly demonstrates that even the most compliant stablecoins rely on the robustness of the traditional financial system for their "1:1 redemption" promise, significantly overestimating their resilience to risk. 2. Liquidity and Bank Run Risk: On-Chain "Banking Crisis" Another Achilles' heel of stablecoins is liquidity risk and bank run risk. In the traditional banking system, banks create credit through maturity mismatches, but this also leads to bank run risk. Stablecoins face similar challenges: their reserve assets may include illiquid assets, or their redemption mechanisms may be delayed. If the market becomes widely skeptical of the issuer's solvency (for example, due to insufficient reserves or asset devaluation), this could trigger large-scale redemption requests in a very short period of time. Due to the openness and transparency of blockchain transactions, this "on-chain run" can quickly form a self-reinforcing panic cycle, causing stablecoin prices to plummet and even triggering chain reactions throughout the DeFi ecosystem. The collapse of TerraUSD (UST) in 2022 is a prime example of how algorithmic stablecoins can experience liquidity depletion under market pressure, and its lessons remain resonant. 3. Compliance and Systemic Risk: The Sword of Damocles of Regulation The cross-border, 24/7, and peer-to-peer nature of stablecoins makes them a natural tool for money laundering, terrorist financing, and capital flight. Their anonymity, or pseudo-anonymity, facilitates illicit capital flows, posing significant challenges to global financial regulation. Furthermore, the scale of stablecoins is already significant. As of August 2025, the total global stablecoin market capitalization reached $270 billion, with USDT and USDC together accounting for over 80% of the market share, forming a "duopoly." This high concentration not only exacerbates the risk of "too big to fail," but also, if a leading stablecoin fails, the impact will ripple through the entire crypto market and even the traditional financial system. Federal Reserve Chairman Powell has repeatedly warned that large stablecoins may pose a threat to financial stability. Therefore, stablecoins are by no means "risk-free assets." Investors should be aware that their supposed stability lies behind complex financial operations and potential systemic risks, and should never be equated with bank deposits or cash.
II. Latest Developments in Hong Kong's Stablecoins: A "Chinese Model" for Regulation and a Global Coordinate
On August 1, 2025, the Hong Kong Stablecoin Ordinance officially came into effect, marking the implementation of the world's first comprehensive regulatory framework for fiat-pegged stablecoins. This event is not only a milestone in Hong Kong's fintech development, but is also likely to serve as a "barometer" for global stablecoin regulation.
1. Market Dynamics: Giants Scramble for Market Share, Intensifying Competition for Licenses
Following the entry into force of the Stablecoin Ordinance, a fierce competition for licenses quickly erupted within Hong Kong's financial sector. Although the Hong Kong Monetary Authority explicitly stated that "no licenses had been issued as of August 1st," and that the first batch of licenses is expected to be announced in early 2026, this has not dampened market enthusiasm. Traditional financial institutions have taken the lead: Hong Kong's three major note-issuing banks—Bank of China (Hong Kong), HSBC, and Standard Chartered Bank—are strong contenders for the first batch of licenses, leveraging their mature experience in fiat currency reserve management, strong capital positions, and close relationships with regulators. Standard Chartered Bank and Bank of China (Hong Kong) have already initiated the application process.
Tech giants are actively making plans:JD CoinChain Technology has entered the second phase of the Hong Kong Monetary Authority's "Stablecoin Issuer Sandbox", with testing scenarios covering cross-border payments, supply chain finance, and retail transactions;Ant Group has initiated its application process and has engaged in multiple rounds of communication with regulators.
Market sentiment and warnings: Despite buoyant market sentiment, the Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority jointly issued a statement on August 14, urging the public to remain cautious about market fluctuations related to the concept of stablecoins, emphasizing that "expressing an intention or submitting an application does not mean that a license will eventually be issued", and warning market participants to avoid making misleading statements. This reflects the regulators' high level of caution in preventing "concept speculation" and "stock price manipulation." 2. Regulatory Requirements: The Strictest Worldwide, Setting the "Hong Kong Standard" The core of Hong Kong's Stablecoin Ordinance is "strict oversight, high thresholds, and strong transparency." Its requirements are among the strictest in the world, primarily reflected in the following: Mandatory Licensing: Any company issuing a fiat stablecoin in Hong Kong, or issuing a stablecoin pegged to the Hong Kong dollar overseas, must apply for a license from the HKMA. Unlicensed operations face fines of up to HK$5 million and seven years' imprisonment. High capital threshold: Non-bank applicants must have a minimum paid-in capital of HK$25 million, screening issuers with sufficient risk resilience from the outset. 100% reserve and asset segregation: Issuers must allocate 100% of their reserve assets in highly liquid assets such as cash and short-term government bonds, and independently hold them in custody with licensed banks to ensure "full backing, high liquidity, and strict segregation." Mandatory transparency and anti-money laundering: Issuers must publish daily audit reports on their reserve assets, establish a comprehensive KYC/AML system, prohibit the payment of interest to prevent disguised deposit-taking, and only licensed institutions may publish advertisements. Prudent licensing: Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, has made it clear that only a "small number" of licenses (in the single digit) will be granted initially, emphasizing the principle of "better to have fewer than enough" to ensure the steady development of the market. Hong Kong's move, through establishing the world's strictest regulatory framework, aims to establish itself as a "global compliance hub for digital finance," attracting truly capable and compliance-conscious innovators rather than speculators. 3. Latest Developments: Regulatory "Cooling Down" and Market "Cooling Down" In mid-August, the development of stablecoins in Hong Kong entered a critical "cooling-off" and "observation" period. As of August 17, the Hong Kong Monetary Authority and the Securities and Futures Commission (SFC) had not yet announced any substantive progress on the review and approval of any license applications, explicitly reiterating that "preliminary discussions do not equate to approval." The regulatory "cooling down" measures have been effective: Market hype has quickly subsided: Several companies whose share prices had previously surged due to the concept of "stablecoin licenses" have now seen a sharp correction, indicating that the market is shifting from irrational speculation to a rational assessment of fundamentals and regulatory outcomes. Applicants face a tough test: More than 50 institutions have expressed their intention to apply, including internet giants, international banks, and payment platforms. However, regulators have made it clear that only a small number of licenses will be issued initially, and the approval standards are extremely high, posing comprehensive challenges to applicants' capital strength, compliance and risk management, real business scenarios (such as cross-border trade settlement), and anti-money laundering capabilities. Regulatory technology is also being upgraded: To address potential market manipulation, the Hong Kong Securities and Futures Commission (SFC) has activated its dedicated market surveillance team and advanced systems to closely monitor stablecoin-related trading activities and will take strict action against any violations. These recent developments clearly signal that Hong Kong's stablecoin strategy is not intended to create a short-term market bubble, but rather to build a long-term, robust, and compliant global digital financial infrastructure. The issuance of stablecoin licenses in Hong Kong will be prudent, gradual, and based on high standards. The true winners will be those long-term investors who can deeply integrate stablecoin technology with the real economy and demonstrate exceptional compliance capabilities. III. Global Stablecoin Outlook: A New Landscape Under the Wave of Compliance Hong Kong's regulatory practices are not isolated incidents, but rather a microcosm of the strengthened oversight of stablecoins by major economies around the world. Looking ahead, the development of stablecoins will demonstrate the following trends: 1. Global regulatory convergence: Compliance becomes the only path forward. Major economies such as the United States, the European Union, the United Kingdom, and Japan are promoting or have already implemented strict regulatory frameworks for stablecoins. For example, the US's GENIUS Act and the EU's MiCA both require 100% reserve adequacy, mandatory audits, and licensed operations. This means that only stablecoins that meet the stringent compliance requirements of major global markets will survive and thrive. The compliance costs of global stablecoins will rise sharply, creating a powerful "compliance moat." 2. Market Restructuring and Intensified Matthew Effects Under strict regulatory oversight, resources will be concentrated in leading compliance institutions. USDC, due to its high compliance, is likely to further consolidate its market position, while USDT will face greater challenges if it fails to provide full transparency into its reserves. Meanwhile, traditional financial institutions (such as banks and payment giants) will become key players in the stablecoin market, leveraging their capital, compliance capabilities, and customer base. Tech giants like Ant and JD.com will also open up new growth opportunities if they successfully obtain licenses in key markets like Hong Kong. 3. Competing and cooperating with CBDCs to build a future payment ecosystem The rise of stablecoins will create a competitive and cooperative relationship with central bank digital currencies (CBDCs) around the world. CBDCs, backed by state credit and offering greater security, will dominate domestic payments and monetary policy transmission. Compliant stablecoins, on the other hand, may play a complementary role in cross-border payments and specific scenarios (such as supply chain finance and RWA tokenization). In the future, a diversified payment ecosystem comprised of central bank digital currencies, compliant stablecoins, and traditional payment instruments will gradually emerge. 4. Integrating Technology and Regulation to Enhance Transparency Blockchain's transparency will be leveraged to empower regulation. In the future, regulators may require issuers to verify the status of reserve assets to regulators and the public through methods such as "on-chain real-time audits," thereby completely resolving the "trust" issue. Privacy technologies such as zero-knowledge proofs (ZKPs) will also protect user privacy while meeting KYC/AML regulatory requirements. Conclusion As a product of financial innovation, the value of stablecoins is undeniable. However, beneath this halo, risks such as centralization, liquidity, and compliance hang like a sword of Damocles. In 2025, with the implementation of global regulatory frameworks such as Hong Kong's Stablecoin Ordinance, stablecoins will move from a "free kingdom" to a "rule of law." Hong Kong regulators' recent timely intervention in market speculation and their cautious approach to licensing further demonstrate their resolve and determination to build a "global digital financial hub." For market participants, only by embracing regulation, adhering to compliance, and enhancing transparency can they navigate the future wave of digital finance. Investors should abandon the simplistic notion that "stability equals security," deeply understand the inherent risks, and invest rationally. The future of stablecoins lies not in disrupting tradition but in becoming a robust bridge connecting traditional finance and the digital world within a regulatory framework.
JinseFinance
WenJun
Xu Lin
Miyuki
Brian
Clement
Snake