What makes a financial hub truly modern in 2025? Is it the buzz of high-frequency trading desks, a crowded IPO calendar, or the sheer density of family offices managing billions? Increasingly, it’s how a city navigates the unfolding digital currency revolution — not by chasing hype but by laying down clear, pragmatic rules that fuel innovation while managing risk.

On Aug 1, Hong Kong’s long-anticipated Stablecoins Ordinance took effect, officially licensing fiat-referenced stablecoin issuers under a bespoke regulatory framework. This isn’t just regulatory box-ticking; it’s a defining milestone signaling Hong Kong’s intent to cement its position as a leading international financial center and a vital node in the global digital asset ecosystem.

Stablecoin — blockchain-backed digital tokens pegged 1:1 to traditional currencies — has quietly become the plumbing of the crypto-economy. Unlike bitcoin’s wild price swings, stablecoin promises stability, speed, and lower transaction costs. Hong Kong’s new law demands serious institutional credibility: Issuers must hold at least HK$25 million ($3.2 million) in capital, maintain 100 percent reserves in high-quality liquid assets like short-term government bonds, disclose real-time reserve status publicly, and adhere to rigorous anti-money laundering and know-your-customer protocols. Innovation here is tethered firmly to trust.

This legislation arrives alongside the United States’ own federal regulatory framework for stablecoin, the so-called GENIUS Act, signed just weeks ago. The US approach is dollar-centric and highly prescriptive, restricting issuance to banks or federally chartered subsidiaries and mandating 100 percent reserves without asset rehypothecation. Hong Kong’s ordinance takes a more flexible stance, embracing multicurrency stablecoin pegged not only to the Hong Kong dollar and US dollar but, critically, to the offshore renminbi.

This regulatory flexibility is more than a footnote — it’s strategic positioning. Hong Kong has long been the largest offshore RMB hub in the world. Until now, offshore RMB stablecoin operated in legal limbo, hampering innovation and adoption. The ordinance finally provides a clear, legally backed path for RMB stablecoin, which could transform cross-border payments by creating an alternative to the US-dominated SWIFT system.

Why does this matter? SWIFT — the global financial messaging backbone — has long been the gatekeeper of international payments. But it’s expensive, slow, and subject to geopolitical frictions. China’s own Cross-Border Interbank Payment System is an improvement but remains centralized and limited in scope. By contrast, a stablecoin-based RMB payment system running on public blockchain technology promises real-time settlement, dramatically lower fees, and enhanced transparency.

This dovetails perfectly with China’s broader strategy to internationalize the RMB and promote its Belt and Road Initiative (BRI). Faster, cheaper and more politically neutral cross-border payment rails could unlock trade efficiencies with BRI-participating countries and beyond.

The benefits aren’t just macroeconomic or geopolitical. Ordinary Hong Kong residents stand to gain as well. Imagine paying for groceries at the wet market using a Hong Kong dollar stablecoin — transaction fees charged to merchants could be significantly lower than the roughly 1.5 percent currently typical with Octopus cards or credit card payments. Cross-border remittances, whether to family members or foreign domestic workers, could be settled in minutes rather than days, with fees dropping sharply from what traditional bank transfers usually cost. This isn’t just theory — it represents a genuine step forward in convenience and financial inclusion.

With a comprehensive regulatory framework now in place, the message is unmistakable: Hong Kong is open for stablecoin business. It’s ready to write the next chapter of global finance — faster, cheaper, and smarter

Family offices and asset managers should be paying close attention. Stablecoin promises 24/7 settlement and improved liquidity, enabling more dynamic investment strategies. Moreover, the rise of asset tokenization — transforming real estate, bonds, and other traditional assets into blockchain-based digital tokens — opens new investment avenues. For high-net-worth individuals and family offices, this is a fresh toolkit with vast potential to reshape wealth management.

The Hong Kong Monetary Authority has been judicious in balancing innovation with safety. Through its regulatory sandbox and deposit protection programs, it fosters experimentation without compromising investor protection. This cautious approach is crucial as applications flood in: The HKMA anticipates a concentrated ecosystem where robust players dominate, while smaller outfits may find capital thresholds challenging.

It’s tempting to view the US and Hong Kong as locked in a regulatory standoff, but the relationship is more symbiotic than adversarial. Hong Kong stands as a compliant gateway for US dollar stablecoin entering Asia, while American tech innovation and market depth bolster Hong Kong’s ecosystem. Cross-border, cross-chain cooperation is the future — an interoperable global network rather than a fragmented battlefield.

Traditional banks should not dismiss stablecoin as a threat. Decentralized finance (DeFi), which hinges on stablecoin, is revolutionizing lending and payments with leaner, faster, and more transparent protocols. For banks, this is a wake-up call to innovate or risk obsolescence. Hong Kong’s banks are well-capitalized and stable, but their future competitiveness depends on partnering with fintech and blockchain innovators to co-create next-generation financial services.

Stablecoin also threatens to upend banking’s hold on deposits. In countries with fragile financial systems like Venezuela and Argentina, citizens already use dollar-pegged stablecoin to escape local currency inflation, eroding banks’ deposit base. While Hong Kong’s currency board and banking system remain rock-solid, the principle is clear: Stablecoin offers faster, cheaper alternatives for payments and credit, pressuring traditional banks worldwide.

Moreover, stablecoin underpins many DeFi lending platforms, offering transparent, global credit with fewer intermediaries and lower costs than traditional bank loans. For Hong Kong’s financial ecosystem, embracing these technologies offers a path to maintain relevance amid tectonic shifts.

The city’s Stablecoins Ordinance is more than legislation — it’s a strategic masterstroke. It blends rigorous regulation with pragmatic flexibility, signaling Hong Kong’s readiness to lead in digital finance and RMB internationalization.

With a comprehensive regulatory framework now in place, the message is unmistakable: Hong Kong is open for stablecoin business. It’s ready to write the next chapter of global finance — faster, cheaper, and smarter.

The author is chairman of the Asia MarTech Society and sits on the advisory boards of several professional organizations, including two universities.

The views do not necessarily reflect those of China Daily.