In a landmark move for digital asset regulation, the Hong Kong Special Administrative Region Legislative Council passed the Stablecoin Bill in a third reading on May 21, 2025. This pivotal legislation marks a strategic step toward establishing a formal licensing regime for stablecoin issuers backed by legal tender, setting the stage for a new era in financial innovation—and investor interest has followed swiftly.
Stocks like ZhongAn Online P&C Insurance Co. (06060.HK) and Guotai Junan International Holdings Ltd. (01788.HK) have seen dramatic rallies, with ZhongAn’s shares rising nearly 60% from May to early July and Guotai Junan surging 198% in a single day. These aren’t random market fluctuations—they reflect growing confidence in Hong Kong’s evolving virtual asset ecosystem, powered by stablecoins.
But what exactly gives stablecoins their “magic”? And why are traditional financial players suddenly at the center of a crypto-driven rally?
Why Stablecoins Are Reshaping Finance
Stablecoins are a unique class of cryptocurrency designed to minimize price volatility by pegging their value to an external asset—typically fiat currencies like the U.S. dollar or Hong Kong dollar, but also commodities or even other cryptocurrencies.
There are several types:
- Fiat-collateralized (e.g., USD-backed)
- Crypto-collateralized
- Algorithmic
- Commodity-backed
Their stability makes them ideal for transactions, remittances, and as a bridge between traditional finance (TradFi) and decentralized finance (DeFi). With global stablecoin market capitalization surpassing $240 billion by mid-2025—up over 170 times since 2017—these digital assets are no longer niche experiments.
👉 Discover how stablecoins are redefining cross-border payments and investment access today.
According to Huatai Securities, stablecoin transaction volume hit $15.6 trillion in 2024—outpacing both Visa ($13 trillion) and Mastercard ($8 trillion) in total value settled. While most transactions still occur within automated crypto trading systems, real-world payment adoption is accelerating, especially in B2B contexts where high-value, low-frequency transfers dominate.
Hong Kong’s Regulatory Leap: The Stablecoin Bill Explained
The newly passed Stablecoin Bill introduces a comprehensive framework under 11 parts and 176 clauses, overseen by the Hong Kong Monetary Authority (HKMA). Key features include:
- A mandatory licensing system for entities issuing fiat-referenced stablecoins.
- Requirements for reserves segregation, full redemption at par value, and robust risk management.
- Definition of "designated stablecoins"—those pegged to official currencies or HKMA-approved units.
Any entity issuing stablecoins tied to the Hong Kong dollar—whether based in Hong Kong or overseas—must now obtain a license. This ensures that only institutions with strong compliance, custody, and operational standards can participate.
This regulatory clarity is precisely what markets crave. It reduces uncertainty, attracts institutional capital, and positions Hong Kong as a global hub for compliant digital finance.
Who Benefits? Financial Institutions at the Forefront
ZhongAn Insurance & ZA Bank: Banking Meets Web3
ZhongAn Insurance holds a 43.43% stake in ZA Bank, Hong Kong’s first digital-only bank. After the bill passed, ZhongAn’s stock surged—driven by ZA Bank’s pioneering role in the stablecoin ecosystem.
In July 2024, ZA Bank became the first digital bank in Hong Kong to offer reserve banking services to stablecoin issuers, partnering with Yuanbi Innovation Technology—one of the HKMA’s first sandbox participants. It now serves over 80 Web3 companies and is the banking partner for licensed platforms like HashKey and OSL.
DBS Bank estimates ZA Bank’s potential valuation at $2 billion, implying an $887 million equity value attributable to ZhongAn—value not yet fully reflected in its stock price.
Guotai Junan International: From Brokerage to Virtual Asset Gateway
On June 24, 2025, Guotai Junan International received approval from the Securities and Futures Commission (SFC) to upgrade its license—now allowing it to offer:
- Direct trading of cryptocurrencies (e.g., Bitcoin, Ethereum)
- Trading of stablecoins (e.g., USDT)
- Advisory services on virtual assets
- Issuance and distribution of virtual asset products, including OTC derivatives
This transformation enables clients to access digital assets through a trusted, regulated brokerage platform. As of June 24, 40 Hong Kong brokers had upgraded to this comprehensive "Type 1 + Virtual Asset" license—a number expected to grow.
Hua Chuang Securities predicts more internationally active brokerages will follow, enriching Hong Kong’s financial ecosystem.
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Unlocking Real-World Assets (RWA): The Next Frontier
One of the most transformative potentials of stablecoins lies in Real World Asset (RWA) tokenization—the process of converting physical or financial assets into blockchain-based tokens.
As explained by Ouyang Rihui, Deputy Director at the China Institute of Internet Economy Research, Central University of Finance and Economics:
“Stablecoins enable innovation in RWA projects by bridging tangible assets—such as cash, bonds, commodities, real estate, art, or intellectual property—into the digital realm. This enhances liquidity, divisibility, transparency, and global accessibility.”
Boston Consulting Group forecasts that the RWA market could reach **$16 trillion by 2030**, with stablecoins capturing 30%–50% of that flow. That means up to $8 trillion in tokenized real-world assets could be transacted using stablecoins within five years.
Imagine owning a fraction of a commercial building in Singapore or a gold reserve in Switzerland—all via a digital wallet. Stablecoins make this possible by serving as the settlement layer.
Could This Pave the Way for Offshore RMB Stablecoins?
Hong Kong’s strategic position—as both a global financial hub and the world’s largest offshore RMB center—makes it an ideal testbed for innovation.
Ouyang Rihui notes that Hong Kong’s regulatory sandbox allows for controlled experimentation while maintaining alignment with mainland China’s financial system. By developing a robust stablecoin framework now, Hong Kong may lay the groundwork for a future offshore renminbi (RMB) stablecoin.
Such a development would support RMB internationalization, offering a digital alternative to traditional cross-border settlements currently dominated by USD-backed stablecoins like USDT.
Xiao Feng, Chairman and CEO of HashKey Group, emphasizes urgency:
“Dollar-based stablecoins reinforce U.S. monetary dominance. China must proactively explore offshore RMB stablecoin pilots—using Hong Kong as a proving ground—and examine how they can integrate with China’s central bank digital currency (CBDC).”
Risks and Systemic Implications
Despite their benefits, stablecoins pose challenges to traditional finance:
1. Deposit Disintermediation ("Deposit Moving")
If users shift savings from bank deposits to stablecoins, banks lose low-cost liabilities—limiting their ability to extend loans. This could disrupt the traditional credit creation model.
2. Monetary Policy Erosion
Stablecoins function like digital cash (M0), bypassing commercial banks. When people convert deposits into stablecoins, it effectively raises reserve requirements—even if central banks lower them—blunting policy tools like reserve ratio cuts.
3. Measurement Challenges
The rise of non-bank money complicates monetary aggregates tracking. Central banks may struggle to assess true money supply and demand, affecting inflation control and financial stability monitoring.
Frequently Asked Questions (FAQ)
Q: What is a stablecoin?
A: A stablecoin is a type of cryptocurrency pegged to a stable asset—like the U.S. dollar or gold—to minimize price volatility while enabling fast, borderless transactions.
Q: How does Hong Kong regulate stablecoins?
A: Through the Stablecoin Bill, Hong Kong requires all issuers of HKD-pegged or fiat-referenced stablecoins to obtain a license from the HKMA, maintain full reserves, and ensure redeemability at par value.
Q: Why did ZhongAn Insurance’s stock rise so sharply?
A: Due to its 43.43% ownership of ZA Bank—the first digital bank offering reserve services to licensed stablecoin issuers—investors see significant untapped value aligned with regulatory progress.
Q: Can stablecoins replace traditional banking?
A: Not fully yet—but they can disintermediate certain functions like payments and savings. Banks must adapt by integrating into the digital asset economy or risk losing market share.
Q: Are stablecoins safe?
A: Regulated stablecoins with transparent reserves and audit trails are generally safer than unregulated ones. However, risks remain around custody, counterparty exposure, and systemic runs during crises.
Q: Will China launch its own RMB stablecoin?
A: Not directly—but Hong Kong could pilot an offshore RMB stablecoin linked to the digital yuan (e-CNY), serving as a complementary tool for international trade and investment.
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