Matching Degree Between Reserve Assets and Total Issuance of Stablecoins
The matching degree between reserve assets and the total issuance of stablecoins is critical to prevent the phenomena of empty funding pools or mismatched funds. Under normal operating conditions, licensees must not suspend redemptions, delay processing, or set stringent redemption thresholds without reason. In the event of redemption difficulties, they must report immediately to the financial management commissioner.
Overall, the “Regulations” provide systematic and in-depth provisions for the compliance framework of the stablecoin industry and the user protection mechanism. For the vast number of investors, the most crucial task is to learn to identify licensed stablecoin issuers and to participate rationally in stablecoin trading and holding activities. With the formal implementation of the “Regulations,” those marginal projects and niche stablecoins that do not meet licensing standards will inevitably face market clearing or even collapse risks. Investors should remain highly vigilant and avoid blindly chasing high prices or easily trusting unauthorized product promotions.
How Broad is the Regulatory Authority of the Monetary Authority?
From the above analysis, it is evident that the role of the financial management commissioner is pivotal within Hong Kong’s stablecoin regulatory framework. This indicates that the Monetary Authority not only undertakes the administrative role of approving licenses but also wields a very broad spectrum of regulatory, investigatory, and direct intervention powers. In general, the financial management commissioner possesses the authority to approve and issue licenses; routine regulatory authority; and the power to directly investigate and gather evidence when licensees face significant operational risks.
According to Part 5 of the “Regulations,” the financial management commissioner may conduct investigations directly and may instruct or appoint investigators to carry out specific inquiries. Investigators may request evidence, information, or explanations from the investigated licensees and may apply to the original court for orders.
This series of provisions indicates that the Monetary Authority covers almost all-encompassing regulatory powers over stablecoins, crucially possessing “quasi-judicial” investigatory powers, which have high deterrent and enforcement capabilities.
Summary by Crypto Salad
For parties intending to participate in the Hong Kong stablecoin market as licensees, the “Regulations” provide a clear framework and path for compliant operations. They only need to assess their own capital and have a clear understanding of the complexity and ongoing expenses related to license applications and subsequent compliance maintenance.
For most parties not intending to apply for a license directly but wishing to engage in the stablecoin ecosystem, cooperating with licensed institutions or those in the process of obtaining licenses is an ideal path to enter the market and expand digital financial business. Such cooperation can cover multiple levels, such as providing technical support, custody services, payment integration solutions, cross-border clearing capabilities, or acting as ecosystem partners to jointly build compliant wallets and trading interfaces. Particularly for enterprises in the payment, Web3 infrastructure, cross-border e-commerce, and compliant custody sectors, in-depth collaboration with licensed entities can ensure compliance while quickly entering the regulatory-approved stablecoin circulation system.
The “Regulations” stipulate that licensed entities must disclose licensing information through official and public channels, making it relatively easier for parties to identify “genuine licenses.” However, selecting a trustworthy stablecoin licensed institution as a partner should not solely rely on the superficial condition of “having a license.” More importantly, a comprehensive assessment of its business strength, compliance level, and cooperation potential is crucial.
For example, the safety and transparency of the reserve assets of licensed entities are vital. An ideal partner should have 1:1 full asset coverage and regularly release reports audited by third parties, clarifying the types of reserves, custodians, and risk conditions. Additionally, the existence of a stable redemption mechanism is also one of the criteria for judgment; parties should pay attention to whether they support seamless redemptions at any time to avoid future liquidity risks.
Finally, parties should also assess the actual influence of the institution in the market, such as whether it has connected with mainstream wallets, exchanges, or payment channels, and factors like community reputation.
What is the Significance of the Stablecoin Regulation Draft?
1. Policy Significance
In the traditional financial system, the power of currency issuance, also known as the minting power, has always been controlled by the state. However, entering the digital currency era, this power is facing challenges. By establishing a stablecoin regulatory framework through local laws, Hong Kong is essentially seizing the “digital minting power,” especially the legal status of Hong Kong dollar-pegged stablecoins.
2. Significance for the Web3 World
Although the Hong Kong government has designated stablecoins as payment tools, in the Web3 context, stablecoins are still the key link connecting on-chain and off-chain, as well as traditional and crypto assets. The institutionalization of stablecoins is crucial for driving the end-to-end closed loop of RWA. In this system, the role of stablecoins may extend beyond payment settlement: whether they can span the entire process of asset generation, subscription, holding, and circulation exchange in the future is an exciting question. With the establishment of a compliance framework, stablecoins are expected to become the “native capital layer” of RWA, reducing reliance on traditional fiat systems and enhancing on-chain financial efficiency and transparency.
In terms of usage scenarios, international trade remains the largest potential market for stablecoins. Practical issues such as cross-border settlement efficiency, foreign exchange costs, and evasion of sanctions are continuously increasing enterprises’ interest in on-chain stablecoin tools. Statistics show that stablecoins achieved significant growth in 2024, with remittance volumes exceeding the sum of Visa and Mastercard. Compliance has brought scale and institutional participation, marking the true commercialization start for projects.
For native Web3 projects, the most significant impact is not being regulated but being incorporated into channels that can access larger-scale assets. In the current context of increasingly scarce “on-chain liquidity,” obtaining a compliant identity means being able to connect with institutional investors, RWA assets, and the traditional financial system, participating in higher quality and more explosive liquidity releases.
3. Is a Renminbi Stablecoin Possible?
Does the implementation of Hong Kong’s stablecoin regulations open up policy imagination space for the “Renminbi stablecoin”? Although the Renminbi stablecoin is still a sensitive topic, its long-term potential cannot be overlooked. Crypto Salad believes that if suitable RWA targets (such as energy, minerals, overseas bonds, etc.) can be found in the future to provide a stable circulation carrier for the Renminbi stablecoin, its usage logic will be more established. Hong Kong may become a “policy buffer zone” between the Renminbi stablecoin and the international Web3 market.
Despite Hong Kong’s pioneering legislation, when looking at the mainland market, stablecoins still face highly complex regulatory challenges. Due to concerns over financial sanctions and reliance on the dollar system, many enterprises have a practical demand for using “non-dollar settlement tools.” However, for regulators, relaxing regulations on stablecoins means addressing:
- The controllability of capital flows and cross-border settlements;
- Pressure from foreign exchange controls and financial stability;
- The authority over data and financial information security issues;
- How to interact and misalign with the existing digital renminbi system;
Therefore, Crypto Salad believes that the mainland is unlikely to replicate Hong Kong’s approach in the short term, but Hong Kong’s “experimental field” experience may provide a blueprint for broader digital financial strategy exploration in the future.
Conclusion
With the formal implementation of the “Regulations,” Hong Kong has undoubtedly taken a key step in the global stablecoin regulatory race. This is not only an innovation in local financial policy but also a strategic exploration of the entire Web3 ecosystem, RWA, and even the global monetary landscape. Although this article has provided a detailed interpretation of the key provisions of the “Regulations,” we believe that what truly deserves attention is not how a specific provision is drafted, but the realization that a brand new institutional space is opening up.
In the absence of a unified global digital currency policy, Hong Kong has provided a clear roadmap: to legalize, systematize, and industrialize stablecoins. This is both a challenge and an opportunity for the entire Web3 world.
These views represent the author’s personal opinions and do not constitute legal advice on specific matters.
