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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
China’s incubating crypto in Hong Kong but the city’s strict rules
are frustrating entry
By John Liu, CNN
Updated:
12:04 AM EDT, Tue September 2, 2025
Source: CNN
Hong Kong is eager to embrace cryptocurrency.
Crypto exchange shops now greet customers in shopping malls. Hundreds
of crypto ATMs have sprung up along the city’s busy streets. And last
week, Eric Trump – son of United States President Donald Trump and
now a central figure in the family’s crypto empire – was featured
at the Bitcoin Asia summit in the global financial center.
Hong Kong has ambitious plans to tap into the $3.8 trillion digital
assets market with new legislation rolled out last month that will
allow licensed businesses to issue stablecoin, a type of cryptocurrency
pegged to real-world assets like the US dollar. As mainland China has
banned crypto trading and mining, the success of the stablecoin
ecosystem in the city, as the country’s testing ground, could pave
the way for an offshore yuan-backed token and further adoption of the
technology eventually.
Experts have hailed the regulation as the first-of-its-kind in Asia,
positioning the city almost on par with the which has since galvanized
a stablecoin frenzy. But the initial enthusiasm for the city’s
stablecoin drive has been tempered by a cautious regulatory approach,
keeping it from replicating the breakneck growth seen in the United
States.
Some potential issuers have expressed frustration at the government’s
stringent requirements, like huge liquid reserve and client identity
verification for anti-money laundering, which raises compliance costs,
according to two industry sources familiar with relevant discussions. A
few of these potential issuers who earlier expressed strong interest
have now taken a wait-and-see approach, as they are hesitant to apply
in the first licensing round, one of the sources added.
“They want to see early players go through the process successfully
before moving forward,” the person said.
Setting a high bar for stablecoin issuers, the city’s de facto
central bank, the Hong Kong Monetary Authority (HKMA) said it would
limit the licenses to only a “handful” of applicants in the first
round of issuance early next year.
Hong Kong set its eyes on courting cryptocurrency business in 2022 with
its first policy statement on digital assets. An declared its
“commitment to establishing Hong Kong as a premier global hub for
digital assets.”
Beyond a bid to strengthen its position as an international financial
hub, Hong Kong’s push into stablecoins underscores China’s growing
interest in the sector. A thaw in Beijing’s rhetoric in recent months
reflects its bid to internationalize the yuan amid concerns that US
dollar-backed stablecoins could further the greenback’s hegemony. But
its tight capital controls may prevent it from adopting the technology
just yet.
Cautious approach
Dozens of firms have already expressed interest in applying for
licenses to issue stablecoins, including major banks and tech companies
such as Bank of China, China’s ecommerce giant JD.com and Alibaba
affiliate Ant Group.
Yat Siu, executive chairman and founder of Web3 video gaming company
Animoca Brands, described Hong Kong’s stablecoin regime as the most
advanced in Asia.
“It puts it ahead of almost any other Asian jurisdiction, because no
other Asian jurisdiction has a stablecoin law that allows you to
license it from central bank,” he said. “It’s going to be a
blueprint for others.”
Last month, Siu’s company , Anchorpoint, along with Standard
Chartered bank and Hong Kong Telecom to apply for a stablecoin license.
The trio has also participated in the city’s stablecoin “sandbox”
pilot that began last year.
Siu noted that one key restriction posed by the stablecoin rules is the
requirement for issuers to back their tokens fully with “very liquid
treasuries.” The HKMA mandates that issuers maintain at least HK$25
million ($3.2 million) in capital, with reserves held in high-quality
assets in segregated accounts and available for prompt redemption.
Experts say these measures help ensure stability and protect holders,
but also effectively shut out smaller players.
Esme Pau, head of capital markets at blockchain security firm Certik,
said the top hurdle facing stablecoin issuers is the “stringent
safeguards” that contribute to a steep cost of entry.
Principal among them is the Know-Your-Customer rules designed to curb
money laundering, which drive up compliance expenses significantly, she
explained. In one example, the HKMA expects stablecoin issuers to
conduct on customers for transactions of HK$8,000 ($1,027) or above.
“Such obligations create a challenging calculus: obtaining a license
under the existing regime may limit near-term profitability, which
explains fading market enthusiasm,” Pau said, adding that the high
bar for issuers, however, produce a more resilient and trusted
stablecoin ecosystem.
Still, she struck a hopeful note, expecting the regulatory regime to
evolve.
“HKMA is adopting a prudent stance at launch. If implementation
proceeds smoothly, requirements are likely to be recalibrated in a more
commercially viable direction over time,” she said.
But with the requirements resembling those imposed on banks, experts
said Hong Kong regulators are likely to award the first batch of
licenses to established financial institutions. That means the initial
use will likely be limited to business-to-business scenarios rather
than retail investors.
“Entry is limited to large, well-capitalized issuers with strong
compliance, operational resilience, and clear economic use cases –
underscoring HKMA’s high bar for sustainable, utility-driven
stablecoin models,” Morgan Stanley’s China economist Jenny Zheng
wrote in a July report.
China’s bitcoin ambitions
At last week’s Bitcoin Asia summit in Hong Kong, over 17,000 local
and international attendees flocked to talks by industry experts.
Booths showcased technologies and services ranging from crypto mining
machines and bitcoin treasury solutions to trading platforms and
wallets.
Despite China’s restrictions on most crypto activities, the country
boasts more crypto users than the US, with over 78 million owners,
according to digital payment firm .
“China is one of the biggest bitcoin mining locations in the world.
They have one of the biggest user bases of bitcoin in the world. Their
citizens own a huge percentage of bitcoin. They’re a bitcoin
superpower,” bitcoin investor and evangelist David Bailey told
CNN’s Kristie Lu Stout.
The annual bitcoin gathering came amid Beijing’s softening stance on
crypto and stablecoins. At China’s top financial forum in June,
central bank governor Pan Gongsheng highlighted stablecoins’ role in
, saying they have “fundamentally reshaped the traditional financial
landscape.
Part of the shift reflects Beijing’s recognition of US dollar’s
growing digital influence, said Jeff Wen, co-founder and chief business
officer of Hayek Technology, a fintech firm based in Taiwan.
“After the passage of Genius Act, the use of stablecoins has extended
beyond American borders, with other countries adopting similar
mechanisms that, in effect, reinforce US dollar dominance,” he said.
To boost the Chinese currency’s digital presence, JD.com and Ant
Group have urged China’s central bank to authorize the launch of
offshore yuan-backed stablecoins in Hong Kong to counter the dominance
of US dollar-pegged cryptocurrencies, reported in June, citing
anonymous sources.
Experts, however, said yuan-backed stablecoins are unlikely to emerge
anytime soon — at least not until Hong Kong dollar–pegged tokens
have proven successful.
“I think when they look at Hong Kong, they see an opportunity to
trial and experiment some of the ideas they might want to bring to
mainland China. And so, this is just a perfect laboratory to trial some
of these bleeding edge technologies,” Bailey said.
For now, much depends on how the first batch of licenses is rolled out
and the stablecoins are brought into circulation.
Emil Chan, co-chair at industry group Hong Kong Digital Finance
Association, said the broader challenge to the city’s crypto hub
ambitions is the conservative culture of its finance industry because
of its long-standing success.
Chan, who also teaches corporate executives in the city’s
universities, noted that few of these professionals have hands-on
experience with digital wallets for cryptocurrency.
Hong Kong’s legacy as a leader in traditional finance, he said, is
“restricting us from opening up our mind and embracing new
products,” he said.
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