Stablecoins have quickly moved beyond crypto markets. They are now at the center of a much larger contest: how currencies compete for influence in global trade and payments. In this race, Hong Kong has positioned itself as a testing ground for the role stablecoins can play in extending monetary power, while still maintaining strict regulatory guardrails.
ASPIRE, LEAP, and the Framework Taking Shape
Through the ASPIRE (Advancing the Strategic Position for Innovation and Regulation of Enterprises) and LEAP (Licensing Enhancements for Advancement of Policy) frameworks, Hong Kong is building one of the most structured regulatory environments in the world for stablecoin issuance, custody, and brokerage.
The city’s new(ish) Stablecoin Ordinance is the major legislative step in its stablecoin strategy, with its implications stretching beyond local markets. It creates a pathway for HKD-backed stablecoins issued by a limited number of licensed entities. Importantly, it also dictates who can broker and custody these tokens, setting the stage for a highly regulated market structure.
In parallel, a custody and OTC dealing regime are being finalised. The critical shift here is that licensed OTC dealers will be required to use regulated custodians. That moves custody from being a business choice to a regulatory obligation, tightening the rules around how client assets are safeguarded and by whom.
Importantly, it allows local regulators to learn from the rollout of custody rules to Hong Kong VATPs, under a new policy paradigm – seeking to incentivise economic growth through markets for crypto-assets and stablecoins.
A Controlled Ambition
Like in Europe or the UK, Hong Kong regulators might be concerned with stablecoins draining deposits from banks. Yet Hong Kong has another challenge. The concern here is capital flight. If stablecoins made it too easy to move yuan or Hong Kong dollars offshore, it could undermine the region’s financial stability. This is why the regime will likely start with HKD-backed stablecoins issued by only a handful of entities, with reserves custodied by a small set of regulated providers.
In this geopolitical climate, this caution has to coexist with opportunity. For Beijing and Hong Kong, the rise of USD stablecoins has become a geopolitical concern. The new US administration openly views stablecoins as a way to extend the dollar’s role in global trade and boost demand for US sovereign debt. If there is to be any credible counterweight to that narrative, it will have to come from China and, by proximity, from Hong Kong.
Attractiveness for Global Issuers
For global stablecoin issuers, regulatory attractiveness often comes down to rules around reserve assets. Some regimes require all reserves in bonds, others impose strict cash requirements, and some require local custody of cash. By comparison, the US is currently the most permissive, allowing 100 percent of reserves to be held in short-term Treasuries under the recently signed GENIUS Act. Hong Kong is not as flexible, but its clarity on issuance, brokerage, and custody is a different kind of draw: it creates predictability in a region that is key to cross-border flows.
What’s more, the Hong Kong stablecoin market opens doors to vast commercial opportunities linked to the digital platforms and corporates of the region.
The Bigger Picture
What makes Hong Kong’s framework so important is the way it positions stablecoins as an instrument of currency competition. By creating space for HKD and potentially offshore yuan stablecoins, Hong Kong is signaling that digital assets can be more than speculative instruments. They can be part of how currencies project power.
The scaling of any stablecoin market will ultimately depend on two questions: who will move the stablecoins and who will safeguard them? In Hong Kong, the answer will be shaped as much by geopolitics as by technology.
