The future of stablecoins is no longer a speculative concept—it’s unfolding in real time. From Hong Kong’s landmark regulatory upgrades to global institutions like the IMF and BIS weighing in on digital currency frameworks, the financial world is witnessing a pivotal shift. As traditional finance integrates blockchain innovation, stablecoins are emerging as both a technological breakthrough and a regulatory challenge.
This transformation isn’t isolated. It reflects a broader movement toward tokenized assets, decentralized infrastructure, and cross-border financial inclusion. With major financial institutions like Guotai Junan International securing virtual asset service provider (VASP) licenses, and governments rolling out comprehensive digital asset policies, the stage is set for stablecoins to redefine how value moves globally.
Regulatory Evolution: From Experimentation to Institutionalization
Hong Kong has positioned itself at the forefront of digital asset regulation with the release of its Hong Kong Digital Assets Development Policy Declaration 2.0. This strategic update outlines a clear vision: transforming Hong Kong into a global hub for digital innovation through a structured, forward-looking framework known as the LEAP commitment.
The LEAP framework emphasizes four pillars:
- Legal and regulatory streamlining: Establishing a unified licensing regime covering digital asset exchanges, stablecoin issuers, custodians, and advisory services.
- Expanding tokenized products: Making tokenized government bonds routine and incentivizing real-world asset (RWA) tokenization.
- Advancing use cases and collaboration: Implementing a stablecoin licensing regime by August 1, 2025, to drive practical applications.
- Talent and partnership development: Fostering academic-industry collaboration and positioning Hong Kong as a center for global digital asset knowledge exchange.
👉 Discover how financial institutions are adapting to new digital asset regulations.
This marks a shift from experimental sandboxes to full-scale institutional adoption. As肖风 (Xiao Feng), Chairman of HashKey Group, noted, this isn't just an incremental change—it's a systemic upgrade that signals Hong Kong’s evolution from a “testing ground” to a digitally mature financial ecosystem.
Stablecoins: The Bridge Between Fiat and Blockchain
Stablecoins represent a critical innovation in modern finance—digital currencies pegged to real-world assets like the U.S. dollar or gold, designed to minimize volatility while enabling fast, low-cost transactions across borders.
According to Xiao Feng, stablecoins should be seen as "tokenized money", leveraging distributed ledger technology (DLT) to enable peer-to-peer value transfer without intermediaries. They serve core monetary functions: payment, settlement, and store of value—especially in high-inflation economies where they enhance financial accessibility.
Their role in promoting financial inclusion is particularly significant. By bypassing traditional banking bottlenecks, stablecoins can address the “last mile” problem in普惠金融 (inclusive finance), offering unbanked populations access to global markets.
However, their rise also brings challenges. The dominance of USD-backed stablecoins like USDT and USDC—accounting for over 99% of the market—raises questions about dollar hegemony and national monetary sovereignty. For China, this underscores the urgency of exploring offshore RMB-stablecoin pilots via Hong Kong, potentially integrating them with the digital yuan (e-CNY) for greater international reach.
Global Perspectives: Divergent Approaches to Oversight
While Hong Kong advances its regulatory blueprint, other jurisdictions are crafting their own responses.
In the UK, the Financial Conduct Authority (FCA) has proposed stringent rules requiring stablecoin issuers to maintain 1:1 reserves in low-risk, liquid assets, managed by independent third-party custodians. This mirrors Hong Kong’s Stablecoin Ordinance, which mandates full reserve backing, transparency in asset composition, and regular independent audits.
Transparency is non-negotiable. Regulators demand public disclosure of:
- Reserve management policies
- Risk assessment frameworks
- Asset breakdowns
- Audit results
These measures aim to prevent systemic risks and protect users from fraud or insolvency—lessons drawn from past collapses in the crypto sector.
👉 Learn how transparent reserve practices are shaping investor trust in digital assets.
Meanwhile, the International Monetary Fund (IMF) sees both opportunity and risk. As IMF Deputy Managing Director Li Bo stated at the 2025 Summer Davos Forum, digital assets can enhance cross-border payments and financial inclusion, especially in Asia, Africa, and Latin America. However, effective oversight remains the central challenge.
The IMF, alongside the Financial Stability Board and Basel Committee, is working to establish global standards for central bank digital currencies (CBDCs) and private stablecoins—ensuring innovation doesn’t come at the cost of stability.
Systemic Challenges: Can Stablecoins Replace Traditional Money?
Despite rapid growth, stablecoins face fundamental hurdles in becoming pillars of the global monetary system. A recent Bank for International Settlements (BIS) report evaluated stablecoins against three critical criteria—and found them wanting.
1. Singleness Test – Fragmentation of Value
Unlike central bank-issued currency, stablecoins are liabilities of private entities. When you receive USDT or USDC, you're not holding “dollars” in the traditional sense—you're holding claims against Tether or Circle. This creates fragmented forms of “dollar”: red dollars, blue dollars, etc., undermining the "payment in full" principle essential to monetary unity.
2. Elasticity Test – Inflexible Supply
Central banks can expand money supply during crises through monetary policy. Stablecoin issuers cannot. Every new coin requires pre-funded reserves—a cash-in-advance constraint that limits their ability to provide liquidity during stress periods.
3. Integrity Test – Risk of Misuse
Public blockchains offer privacy but also enable illicit activities. Stablecoins have been used by criminal and terrorist networks due to pseudonymity and cross-jurisdictional movement ease. Without robust KYC/AML frameworks, they threaten financial integrity.
Yet, BIS acknowledges stablecoins’ growing influence. Major players now invest heavily in U.S. Treasury markets—comparable to large money market funds. A $3.5 billion increase in stablecoin supply can reduce Treasury yields by 2.5–5 basis points; redemptions have triple that impact.
Market Momentum: Institutional Adoption Accelerates
The market response has been explosive. On June 25, 2025, Guotai Junan International’s stock surged 198% after receiving VASP approval from Hong Kong’s Securities and Futures Commission (SFC). It became the first Chinese-owned broker in Hong Kong authorized to offer full virtual asset trading—including Bitcoin, Ethereum, and stablecoins—through integrated accounts.
Other firms followed suit:
- Futu Holdings (FUTU.US)
- ZhongAn Online (06060.HK)
- Interactive Brokers (IBKR.US)
All have secured VASP licenses, signaling strong institutional momentum.
Moreover, Guotai Junan launched structured products based on spot virtual asset ETFs in 2024 and began issuing digital bonds in early 2025—demonstrating how legacy finance is embracing tokenization.
With over 30 Chinese brokers operating in Hong Kong and 13 dual-listed in mainland and Hong Kong markets, the path for broader virtual asset integration is clear.
Frequently Asked Questions (FAQ)
Q: What is a stablecoin?
A: A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset like the U.S. dollar or gold.
Q: Why are stablecoins important for financial inclusion?
A: They enable fast, low-cost cross-border transactions without relying on traditional banking infrastructure—crucial for underbanked populations.
Q: Are stablecoins regulated?
A: Yes—regulatory frameworks are emerging globally. Hong Kong and the UK require full reserve backing and third-party custody.
Q: Can stablecoins replace fiat currency?
A: Not yet. While widely used for payments and trading, they fail key monetary tests around singleness, elasticity, and integrity.
Q: How do stablecoins affect bond markets?
A: Large stablecoins invest in short-term Treasuries; their buying/selling activity can influence yields and liquidity.
Q: What is RWA tokenization?
A: Real-world asset (RWA) tokenization involves converting physical assets like real estate or bonds into blockchain-based tokens for improved liquidity and programmability.
👉 See how tokenized real-world assets are unlocking new investment opportunities.
Conclusion: Toward a Hybrid Financial Future
The future of stablecoins lies not in replacing traditional finance—but in integrating with it. Through regulation, transparency, and technological innovation, they can become reliable tools for payment efficiency, asset liquidity, and global inclusion.
As Hong Kong leads with policy clarity and institutions adapt rapidly, the world watches closely. The journey ahead requires international cooperation, sound monetary design, and unwavering commitment to stability.
One thing is certain: the era of digital finance has arrived—and stablecoins are at its core.