The Impact of Hong Kong Stablecoin Legislation on China's Virtual Money Industry and Future Trend Analysis

The Legislative Council of the Hong Kong Special Administrative Region passed the "Stablecoin Ordinance Draft" on May 21, 2025, becoming the world's first jurisdiction to establish a comprehensive regulatory system for fiat stablecoins. This legislative action provides a clear legal framework for the Hong Kong Virtual Money industry, bringing profound positive impacts on the development of the Virtual Money industry in Hong Kong and mainland China by balancing financial innovation with risk prevention.

1. Positive Impact on Hong Kong

(1) Strengthen Hong Kong's position as a global digital asset center.

The passage of the "Stablecoin Regulation Draft" further solidifies Hong Kong's leadership position in the global digital asset market. The bill clarifies the regulatory requirements for stablecoin issuers, including a registration capital threshold of HKD 25 million, a 1:1 reserve asset backing the issuance volume, and mandatory protection of unconditional redemption rights, among others. These strict yet clear regulatory standards provide a transparent compliance environment for the stablecoin market and help attract global investors and businesses to choose Hong Kong as the operational center for stablecoin activities.

The launch of the Hong Kong dollar stablecoin will enhance Hong Kong's competitiveness in the cross-border payment sector, promote the development of the Web3 ecosystem, and inject new vitality into Hong Kong's digital economy. For example, the Hong Kong dollar stablecoin can be used for efficient and low-cost cross-border trade settlement, further consolidating Hong Kong's position as a financial hub in Asia.

(2) Promote financial innovation and technological development

The passage of the "Stablecoin Regulation Draft" provides a clear compliance path for stablecoin issuers and encourages enterprises to innovate within a regulatory framework. The "regulatory sandbox" mechanism allows companies to test innovative products in a controlled environment, reducing compliance costs for startups while providing space for technological iterations.

Stablecoins, as a core component of decentralized finance (DeFi), will drive further development in areas such as Web3, NFTs, and the metaverse with their legalization. The passage of the bill will further stimulate the application of blockchain technology in areas such as payments, settlements, and supply chain finance, creating a vibrant digital asset ecosystem in Hong Kong.

(3) Enhance market confidence and investor protection

Hong Kong has effectively reduced market risks by establishing a comprehensive regulatory framework for stablecoins, emphasizing reserve asset management, liquidity, and anti-money laundering (AML) requirements. These measures ensure the sustainability of the business models of stablecoin issuers while providing higher security guarantees for investors. The mandatory 1:1 reserve asset requirement and unconditional redemption rights can effectively prevent the risk of stablecoin depegging, enhancing market trust in stablecoins.

Hong Kong's regulatory framework seeks a balance between innovation and protection, demonstrating an open and compatible attitude. This balance not only attracts the attention of global crypto companies but also provides local retail investors with safer investment channels. This pioneering demonstration effect will drive more financial institutions into the Virtual Money market, expanding Hong Kong's investor base.

(4) Promote cross-border payment and financial connectivity

The launch of the HKD stablecoin will optimize the financial connectivity between Hong Kong and other regions in Asia, especially in the context of the "Belt and Road" initiative and the development of the Guangdong-Hong Kong-Macao Greater Bay Area. The HKD stablecoin can be used for cross-border e-commerce, trade settlement, and supply chain finance, reducing transaction costs and enhancing settlement efficiency. This will not only help Hong Kong consolidate its position as a global trade center but also provide more digital financial tools for local enterprises.

2. Positive Impact on the Mainland

(1) Provide regulatory experience reference for the mainland

The passage of the "Stablecoin Regulation Draft" in Hong Kong provides a regulatory model that can be referenced by the mainland. Hong Kong's regulatory framework emphasizes the balance between compliance, risk prevention, and financial innovation, which aligns with the mainland's policy goals of promoting the application of blockchain technology in the financial sector (such as digital RMB).

Hong Kong's "regulatory sandbox" mechanism provides a testing environment for stablecoin issuance, and this model may inspire the mainland to explore similar pilot mechanisms in specific areas (such as Central Bank Digital Currency (CBDC) or supply chain finance). As a bridge between the mainland and international markets, Hong Kong's successful experience may promote the gradual relaxation of regulatory restrictions on virtual assets such as stablecoins in the mainland in the future, especially in the field of stablecoins pegged to the Hong Kong dollar or Renminbi.

(2) Promote the internationalization of the Renminbi

Hong Kong's stablecoin legislation provides a testing ground for non-U.S. dollar stablecoins (such as those pegged to the Hong Kong dollar or Chinese yuan). As an offshore center for the Chinese yuan, Hong Kong has a mature financial infrastructure and an internationalized market environment, making it suitable as a testing ground for yuan stablecoins. If the yuan stablecoin succeeds in Hong Kong, it will further promote the use of the yuan in global payments and settlements, aiding the internationalization process of the yuan.

Hong Kong's stablecoin regulatory framework may provide compliant channels for mainland enterprises to issue RMB-pegged stablecoins through Hong Kong, used for cross-border trade and investment. This model not only enhances the international acceptance of the RMB but also offers new financing and payment tools for mainland enterprises, strengthening their competitiveness in the global market.

(3) Promote the collaborative development of financial technology in the Guangdong-Hong Kong-Macao Greater Bay Area

The stablecoin legislation in Hong Kong provides new opportunities for the collaborative development of financial technology in the Greater Bay Area. For example, the HKD stablecoin can complement the digital RMB, jointly serving the cross-border payment, trade financing, and supply chain finance needs of the Greater Bay Area. Hong Kong's regulatory experience and mature financial market can provide compliance guidance for enterprises in the Greater Bay Area, attracting more mainland technology companies to enter the international market through Hong Kong.

Hong Kong's Virtual Money trading platforms and stablecoin issuers may collaborate with mainland enterprises to develop blockchain-based financial products. For example, stablecoins can be used in supply chain finance platforms in the Greater Bay Area to address the financing difficulties faced by small and medium-sized enterprises. This cross-regional collaboration will promote the integration and development of the fintech ecosystem in the Greater Bay Area.

(4) Indirectly stimulate the application of blockchain technology in the domestic region

The stablecoin legislation in Hong Kong provides a successful case for the commercialization of blockchain technology, which may indirectly stimulate mainland enterprises to accelerate the research and application of blockchain technology within a compliant framework. The "sandbox" testing experience of stablecoins in Hong Kong can provide technical references for mainland enterprises and promote the implementation of blockchain in the fintech sector.

3. Future Trend Outlook

The passage of the "Stablecoin Regulation Draft" in Hong Kong marks a new phase in global stablecoin regulation. In the future, Hong Kong may become a global testing ground for non-USD stablecoins, attracting more international enterprises to its market. At the same time, Hong Kong's regulatory model could serve as a reference for other countries and regions, promoting the coordination and development of global stablecoin regulation.

For mainland China, Hong Kong's successful experience may prompt regulators to gradually relax restrictions on virtual assets in the future, especially in areas related to the internationalization of the renminbi. Mainland enterprises can participate in the global digital asset market through Hong Kong's compliant channels, enhancing their international competitiveness. In addition, the fintech cooperation between Hong Kong and the mainland will be further deepened under the framework of the Guangdong-Hong Kong-Macao Greater Bay Area, forming a model for regional collaborative development.

Four, Conclusion

The passage of the Hong Kong "Stablecoin Regulation Draft" has far-reaching positive effects on the virtual money industry in Hong Kong and mainland China. For Hong Kong, the bill solidifies its position as a global digital asset hub, promoting financial innovation, investor protection, and the development of cross-border payments. For mainland China, Hong Kong's regulatory experience provides a reference for the mainland, stimulating the internationalization of the Renminbi, the coordinated development of fintech in the Guangdong-Hong Kong-Macau Greater Bay Area, and the application of blockchain technology. In the future, as the stablecoin market in Hong Kong matures and cooperation with the mainland deepens, both sides will occupy a more significant position in the global digital finance arena, injecting new momentum into regional economic development.