The wind of stablecoins continues to blow.
The Stablecoin Genius Act was signed by Trump as formal legislation, and the Hong Kong Stablecoin is in the countdown for issuance. On the upcoming August 1, the Hong Kong Stablecoin Ordinance will officially take effect. Compared with the huge waves in the currency circle caused by the US stablecoin, the waves in Hong Kong are only ripples in the field of encryption, but in the stock market, it has rarely shown amazing influence.
Since the passage of the Hong Kong Stablecoin Bill, the Hong Kong stock market has shown unprecedented enthusiasm for stablecoins. The Hong Kong stock stablecoin sector has seen a surge in growth, with many stocks doubling in value and many 10-fold bull stocks. Investors are talking about it and listed companies are happy to increase their capital. Although everyone seems to be happy, Hong Kong's regulators have new concerns. Recently, Hong Kong Monetary Authority Chief Executive Eddie Yue wrote an article on the official website titled "Stable and Long-term Stablecoins" to cool down the soaring stablecoin market.
However, facing this sizzling kettle, it is difficult to lower the temperature.
On May 21, the Hong Kong Stablecoin Bill was passed by the Legislative Council for the third reading. At that time, since the US Stablecoin Bill was still under review by the Senate, Hong Kong's "preemptive" operation caused heated discussions in the market. In fact, in terms of content, the licensing system, 100% full reserves, HK$25 million paid-in capital, anti-money laundering regulations, etc. are no different from the legislation in other mainstream regions, but in terms of public opinion, the two extremes have become the true portrayal of Hong Kong's stablecoin.
On the one hand, due to the decline of Hong Kong's influence in the crypto field and the fact that many preemptive operations have been loud but not effective, the crypto market generally holds a relatively pessimistic view of it, believing that even if Hong Kong continues to consolidate its regulatory foundation and improve its regulatory regulations, under limited market demand, it will eventually become just another subsidiary of the US dollar stablecoin, and it is enough to play the residual heat of some windows.
Although the crypto market does not like it, this news is extremely good in other markets. After the regulations were passed, major giant companies with a keen sense of smell rushed to the beachhead and laid out, and traditional media and securities firms competed to report on it, allowing stablecoins to truly break through the circle. For a time, the discussion on the connotation, usage scenarios, and value significance of stablecoins continued to ferment, gradually extending to the debate on the necessity of RMB stablecoins. The trillion-dollar stablecoin market seemed to be on the eve of an explosion.
This Friday, the Hong Kong Stablecoin Ordinance will officially come into effect, and the license application will be released simultaneously. However, just one week before it came into effect, Hong Kong Monetary Authority Chief Executive Eddie Yue poured cold water on stablecoins. In his article "Stable Coins for a Long Term Journey", it was clearly mentioned that stablecoins are being over-conceptualized and showing a bubble trend. Eddie Yue pointed out that at best only a few stablecoin licenses will be approved in the initial stage. He hoped that investors would remain calm and think independently when digesting the good news in the market. At the same time, the HKMA will implement the supervision of the regulations and the two guidelines on anti-money laundering to solicit market opinions. In terms of anti-money laundering, more rigorous requirements will be established to minimize the risk of stablecoins becoming a money laundering tool.
From the above remarks, it can be seen that Hong Kong has expressed concerns about the current market situation, and has adopted a very cautious attitude towards the approval of stablecoin issuer licenses. As for why the competent authorities have to write articles to pour cold water on the market, the reason is also very simple. Stablecoins are a bit overheated in Hong Kong.
This overheating is concentrated in the stock market. The bright prospects and the very early development make stablecoins a very beautiful capital story. Under this story, almost all stocks related to stablecoins have seen rapid growth, and the growth effect is almost immediate.
After Guotai Junan International was approved for a securities trading license in June and became the first Chinese securities firm to provide full-chain services for virtual assets, it soared 198% on June 25, and the annual increase was 4.58 times.
On July 7, Jinyong Investment announced that the company had signed a strategic cooperation framework memorandum with AnchorX to explore potential cooperation in four areas, including cross-border payment and trade, and stablecoin application scenario expansion. On the second day, Jinyong Investment soared 533.17%.
On July 15, China 33 Media announced that the company has started preparations for applying for a stablecoin license. On July 16, China 33 Media closed up 72.73%, and its cumulative increase this year has reached 14.95 times.
Just one piece of news can achieve a straight rise, which is enough to show the strong narrative effect of stablecoins. In addition to the above-mentioned institutions that have newly joined the sector, the original old concept stocks have also taken off collectively. OKEx Cloud Chain, Yunfeng Financial, Yixin Group, Xinhuo Technology Holdings, OSL Group, etc. have all seen a cumulative increase of more than 100% this year. Even the A-shares that have been criticized for a long time have been shaken, and digital RMB concept stocks such as Hengbao Co., Ltd., Sifang Jingchuang, and Chu Tianlong have also ushered in multiple increases.
Against this backdrop, whether it is a "chameleon" enterprise that is riding the wave of the capital effect, or a financial institution that actually wants to participate in the stablecoin pie, or a strategic giant that wants to reduce settlement costs and build a corporate moat, all of them are rushing in. As of now, according to Caixin, there are already fifty or sixty companies that are interested in applying for Hong Kong stablecoin licenses, including both central enterprises and financial institutions in mainland China, as well as Internet giants.
However, the application enthusiasm does not mean the approval enthusiasm. The Hong Kong Monetary Authority stated that among the institutions that applied, most of them are only at the conceptual stage and lack actual application scenarios, while those that have application scenarios lack the technology to issue stablecoins and the experience and ability to control various financial risks. Issuing just for the sake of issuing is obviously something Hong Kong does not want to see. It is in this context that the Hong Kong Monetary Authority stated that only a single-digit number of licenses will be approved in the initial stage.
At the same time, in the face of overheated license applications, the Hong Kong Monetary Authority also intends to adopt a preliminary screening mechanism. Caixin quoted a source as saying that the license for stablecoin issuers will not be issued by applicants downloading forms and submitting written applications on their own, but will be arranged in a similar invitation application system. That is, in actual operation, the Hong Kong Monetary Authority, which is responsible for supervising and issuing licenses, will communicate with interested applicants for stablecoin licenses in advance to understand whether the other party meets the basic application qualifications. Only after obtaining basic approval in the pre-communication will the HKMA issue an application form.
As for who will get the license? Judging from market opinion, the intended issuers who have already participated in the stablecoin sandbox pilot seem to have a greater chance of winning. As early as July last year, the Hong Kong Monetary Authority launched the stablecoin sandbox test, and institutions such as JD CoinChain Technology, Yuancoin Innovation Technology, and Standard Chartered Consortium (including Standard Chartered, Anmi Group and Hong Kong Telecom) were selected. The sandbox test has now entered its second phase. Although the HKMA emphasizes that being selected for the sandbox does not mean that a license will be delegated, and sandbox companies must apply for licenses in accordance with regulations, given the application scenarios and risk control foundations tested in the sandbox, sandbox participants clearly have more experience in how to meet regulatory requirements.
Overall, Hong Kong mainly focuses on three aspects in license applications. The first is technical implementation capabilities, whether it has the technical requirements for issuance; the second is application scenario requirements, which require actual solutions and implementation scenarios; the third is risk control capabilities, especially to prevent stablecoin money laundering risks. Objectively speaking, large enterprises that already have a broad cross-border financial and payment business foundation and a complete risk control system have advantages, while the application success rate of small and medium-sized enterprises is quite slim, and they are more of a running-in role.
From the current perspective, although the HKMA calls for cooling down, it is difficult for the market's FOMO to drop sharply in a short period of time.
First, there is a certain linkage between the development of US stablecoins and Hong Kong. After the passage of the Genius Act, the enthusiasm for stablecoins in the United States has not diminished, Circle has set new highs, and many large institutions have also expressed high interest. Coupled with the positive sentiment in the crypto market and the expected interest rate cuts, the US stablecoin will also usher in a continuous narrative, and this narrative has a transmission effect.
Second, the discussion on Hong Kong stablecoins continues to extend. At first, the market only discussed the Hong Kong dollar stablecoin itself, but now, more discussions have begun to focus on the necessity of offshore RMB stablecoins. National think tanks such as the National Financial Development Research Office, local governments such as the Shanghai State-owned Assets Supervision and Administration Commission, major securities consulting agencies, social organizations, etc. have begun to pay attention to this topic. From the current point of view, many opinions believe that offshore RMB stablecoins should be piloted in the Hong Kong market, and when conditions are ripe, they should be explored in the domestic offshore market represented by the free trade pilot zone. Before this, the reason for the slow development of Web3 in Hong Kong was precisely the blocked channel. If the offshore RMB stablecoin is feasible, it will not only give this field more room for imagination and promote the development of the industry itself, but also have a profound impact on the existing financial system in the long run.
More importantly, for participants, stablecoins are a profitable potential market and are gradually forming a complete industrial chain. From the perspective of issuers, for retail issuers, stablecoins can significantly reduce transaction settlement costs and enhance competitiveness; for payment issuers, starting from the medium, they have the ambition to deeply penetrate the digital asset market and move towards global financial facilities; even if it is only to add color to the stock price and obtain capital narrative, some participants are also motivated to participate. In the recent period when the concept is popular, more than 5 groups such as ZhongAn Online, Fourth Paradigm, Jiami Technology, and Yisou Technology have announced large-scale rights issue financing plans. OSL Group has allocated more than 101 million shares at a price of HK$14.9 per share, and the financing plan is close to HK$2.4 billion. In addition to issuance, virtual asset trading platforms, which are the main carriers of traffic monetization, and custodians with banks as the main body are actively making plans and plan to obtain industry dividends through expansion.
Based on the above, the hype of stablecoins will continue in the short term, and the competition for licenses, as a stepping stone in this compliance competition, will also enter a white-hot stage. However, it is worth noting that as an industry in its early stages of development, the scope of the license, the strength of the radiation effect, and even the feasibility of business needs are yet to be examined. Considering the hard threshold of HK$25 million and the continuous compliance costs that may exceed one million per year, if there is no strong business model support, rashly applying will be more costly than gain. As the Hong Kong Monetary Authority wrote, those who are steady and far-reaching are ultimately a minority, and more companies that only take advantage of the hot spots will inevitably return to their original form after the license washing.
In this regard, investors who keep a close eye on stocks may need to be more careful.
