Hong Kong dollar stablecoin does not need to become USDC

In 1865, HSBC issued the first Hong Kong dollar banknote in Hong Kong. For the next one and a half centuries, three issuing banks maintained the credit of the Hong Kong dollar using the same logic: issuing currency backed 100% by US dollar reserves, making a piece of paper a reliable store of value. Each Hong Kong dollar banknote is essentially a stablecoin backed by bank credit—just printed on paper. In 2026, the same reserve logic, the same issuing banks, and the same regulatory framework will be brought onto the blockchain.

The global stablecoin market has surpassed $300 billion in market value, with 99% being in US dollars. The Hong Kong dollar stablecoin does not need to challenge this pattern, just as the Hong Kong dollar has never attempted to replace the US dollar—its position is at the final leg: US dollar stablecoins complete the cross-border corridor, while Hong Kong dollar stablecoins finalize local settlements.

Local currency prices the local market; this role has been fulfilled by Hong Kong for one hundred and sixty years.

I. Hong Kong Dollar Stablecoin, an Answer That Has Yet to Begin

1.1 The Starting Gun Has Fired

In 2024, the annual trading volume of stablecoins will exceed the combined total of Visa and Mastercard, with a total market value surpassing $300 billion—but in the same year, the share of stablecoins in global payment flows remains at 1%, the same as in 2023 and 2022. Absolute scale is exploding, while relative share remains unchanged.

This is not a contradiction, but two sides of the same coin: the technology had already matured by 2020, but institutions waited five years to truly enter the market—what they were waiting for was not technology, but the "entry permit" granted by regulation. In 2025, regulatory frameworks for stablecoins in multiple major jurisdictions will be established, and the switch that institutions have been waiting for will finally be flipped.

There is a repeatedly validated rule in the payment sector: 3-5 years after regulation catches up with innovation determines the market landscape for decades to come. In the 1960s, the credit card network quickly established the market landscape after the regulatory framework was established—Visa and Mastercard have dominated the payment market for over sixty years since; in the 2010s, mobile payment platforms rapidly scaled after regulation caught up, and the first-mover advantage has yet to be shaken.

The Hong Kong "Stablecoin Ordinance" will take effect in August 2025, with the first batch of licenses issued in March 2026. The license is a ticket to entry, not an answer. This is the starting gun for the Hong Kong dollar stablecoin, not the finish line.

1.2 Two Judgments and Five Questions

Saying that Hong Kong is suitable for developing stablecoins cannot stop at the level of "international financial center"—Singapore, Japan, and the Eurozone are also. What truly differentiates the Hong Kong dollar stablecoin is three structural conditions that are established simultaneously:

• The linked exchange rate provides quasi-US dollar stability, allowing the Hong Kong dollar stablecoin to approach the stability of the US dollar;

• Hong Kong handles over 70% of global offshore RMB payments and is the only node that possesses both offshore RMB liquidity and international financial infrastructure;

• Hong Kong's multi-currency regulations allow CNH to be used as a reserve asset, which is unique among major regulatory frameworks.

Because of the uniqueness of this position, the Hong Kong dollar stablecoin will not become USDC, nor does it need to become USDC. Its opportunity lies in the landing layer of the sandwich structure—US dollar stablecoins create the cross-border corridor, while Hong Kong dollar stablecoins handle local settlements.

Local currency prices the local market. It is not about how large the Hong Kong market is, but how difficult it is to replicate Hong Kong's position.

The analysis in this report is based on two judgments:

Judgment One: The Hong Kong dollar stablecoin and the US dollar stablecoin are not in a competitive relationship, but a layered relationship. The US dollar stablecoin completes the cross-border corridor, and the Hong Kong dollar stablecoin takes the final leg—both are complementary, not competitive.

Judgment Two: The key is not scale, but finding a level position that cannot be replaced. Compliance is just a ticket to entry; the deep integration of local payment systems is the moat.

Most analyses on the market stop at "who will issue"—Standard Chartered, HSBC, OSL, the list of entrants is repeatedly discussed. This report aims to take a step forward: after issuance, in which scenarios can it truly land? Who will be the first to run through? What is the business logic? Based on these two judgments, this report unfolds five questions:

The Hong Kong dollar stablecoin does not need to win the entire market. What it needs is to occupy a channel— and the outline of this channel is already visible.

II. Legislative Background—From Policy Intent to Regulatory Framework

2.1 The Origin of Rapid Legislation

The Hong Kong "Stablecoin Ordinance" took less than a year and a half from the first consultation document to formal implementation. This is an unusual speed for a financial legislation that typically takes three to five years in a jurisdiction.

The unusual speed is driven by dual pressures: externally, Singapore established its stablecoin regulatory framework in August 2023, and the EU's MiCA EMT rules will take effect in June 2024; internally, the Hong Kong Monetary Authority is well aware that once the global regulatory landscape for digital assets is set, latecomers will incur multiple times the institutional catch-up costs. The window for Hong Kong is not long.

2.2 What the Ordinance Regulates, How It Regulates, and Who It Regulates

Hong Kong's legislation is not aimed at restricting stablecoins, but at establishing rules for a market that is already in operation. Before the ordinance took effect, USDT and USDC were already circulating widely in Hong Kong for cross-border trade and crypto asset transactions without any specific regulatory framework—this was the direct trigger for legislation, not regulatory impulse.

The regulatory object of the ordinance is "Specified Stablecoin"—stablecoins that reference one or more official currencies to maintain stable value. Algorithmic stablecoins, Bitcoin, and other volatile assets are not included—reserves must be 100% high-quality liquid assets, and algorithmic models cannot pass this threshold.

More critical than "what to regulate" is "who to regulate." Payment stablecoins are inherently cross-border, so the ordinance explicitly extends its jurisdiction extraterritorially:

• Key Design: Extraterritorial Extension of Hong Kong's Jurisdiction triggers the requirement to apply for a license from the Monetary Authority if any of the following conditions are met: issuing specified stablecoins within Hong Kong; issuing specified stablecoins pegged to the Hong Kong dollar outside of Hong Kong; actively promoting specified stablecoin activities to the public in Hong Kong from anywhere.

The ordinance also clarifies the entry thresholds for issuers: a minimum paid-up capital of HKD 25 million, establishment of a local entity in Hong Kong; reserves must be 100% high-quality liquid assets, strictly separated from proprietary assets; management must pass the Monetary Authority's "Fit & Proper" review. The Monetary Authority's president, Yu Weiwen, clearly stated that the regulatory standards for stablecoins in anti-money laundering and counter-terrorism financing will be nearly on par with those for banks and electronic wallets. These three requirements, combined with bank-level compliance thresholds, directly block most purely on-chain native teams and overseas shell companies, requiring issuers to have tangible application scenarios.

2.3 Comparison with Global Frameworks: Three Different Legislative Goals

The design choices of the Hong Kong ordinance can only be understood in the context of global frameworks. Comparing four frameworks, the core differences lie not in reserve requirements or capital thresholds—these are largely similar—but in a more fundamental question: what triggers regulation.

The most noteworthy line in the table is "Regulatory Logic." The US anchors issuance behavior, the EU anchors user location, and Singapore anchors issuance location—these three frameworks all ask "where to do it." Hong Kong's trigger point is the currency itself: as long as it is pegged to the Hong Kong dollar, regardless of where the issuer or user is located, a license must be applied for from the Monetary Authority. Hong Kong prioritizes institutional discourse, while Singapore actively chooses the narrowest jurisdictional radius to serve as a regional hub—these directions are entirely different.

The three frameworks ask "where to do it," while Hong Kong asks "what to peg."

However, the regulatory framework itself does not create demand; it creates the necessary conditions for demand to emerge. The real test will come after 2026: with the first batch of licenses issued and the first batch of B-end commercial cases emerging, whether the Hong Kong dollar stablecoin can accumulate real usage inertia in trade corridors.

In the long run, the significance of this law may extend far beyond the Hong Kong dollar itself. If the topic of offshore RMB (CNH) stablecoins becomes real at some point in the future, Hong Kong's stablecoin institutional infrastructure will be the most natural prototype: regulatory framework, reserve management system, participation of issuing banks, and the technical accumulation of the Ensemble sandbox can all be directly reused.

III. All Banks Entering the Arena—What Moves Are HSBC, Standard Chartered, and Bank of China Hong Kong Making?

3.1 Is Hong Kong the Endpoint or a Node?

The stablecoin strategies of Standard Chartered and HSBC in Hong Kong are not responses to new regulations—they are a global strategy that has already taken shape, finding a new landing point. Understanding this is the prerequisite for understanding all actions of these two banks in Hong Kong.

Both banks' investments in on-chain finance predate the Hong Kong "Stablecoin Ordinance" by at least three to five years. Standard Chartered has built a complete on-chain infrastructure from custody to settlement to stablecoin reserve management through SC Ventures, launching simultaneously in Singapore and Hong Kong in February 2025—using the same logic, with synchronized landing points in both markets. HSBC is pursuing a path of institutional financial tokenization: the Orion bond platform has issued over $3.5 billion, covering sovereign-level clients. Specific products will be elaborated on later.

Thus, the significance of the Hong Kong "Stablecoin Ordinance" for these two banks is singular: access, not a beginning. A globally prepared digital asset strategy finally has a compliant local currency landing point.

This also illustrates the true posture of traditional large banks in the entire stablecoin wave: not resistance, but absorption. They have not been disrupted by blockchain; rather, they are using their most difficult-to-replicate advantages—regulatory relationships, institutional trust, and corporate client bases—to determine on whose infrastructure the new track will be built. The narrative of disruption has fundamentally misjudged the direction of competition from the start.

3.2 Standard Chartered: Connecting Global Infrastructure to Hong Kong

Standard Chartered's role in the global stablecoin ecosystem is not just as an issuer, but more as an infrastructure provider. This positioning is concretized in Hong Kong as Anchorpoint.

This positioning is not unique to Hong Kong; it is a model that Standard Chartered has already validated in the global stablecoin ecosystem. In February 2025, Standard Chartered did two things simultaneously: reached an agreement with StraitsX to provide reserve custody for the Singapore dollar stablecoin XSGD; announced the establishment of a joint venture, directly applying for a license to issue in Hong Kong. On the same day, using the same logic—acting as both an issuer and the banking infrastructure behind the issuer. Standard Chartered is the custodian bank for Paxos' US dollar stablecoin USDG, the custodian for XSGD, and one of the issuers for Anchorpoint. These three roles are not contradictory; they are different landing points of the same global layout.

In Hong Kong, Anchorpoint's tripartite division of labor covers the complete chain from issuance to scenarios: Standard Chartered provides bank-level compliance and reserve management (with Zodia Custody as the custody layer), Anqi Group is responsible for Web3 scenario development (with over 570 portfolio projects), and HKT Tap & Go provides local retail payment distribution channels.

The real bet Standard Chartered is making in Hong Kong is on cross-border payments and financial markets, not local retail. CEO Bill Winters has publicly stated "bank-level infrastructure and global network"—Standard Chartered's presence in over 50 markets makes it a natural candidate for the China-Southeast Asia trade corridor's settlement layer. The value of issuing a Hong Kong dollar stablecoin through Anchorpoint is not just the local circulation in Hong Kong, but how many markets it can be accepted by Standard Chartered's corporate client network.

3.3 HSBC: Tokenized Deposits as a Long-Term Bet, Stablecoins as an Unexpected Entry

HSBC did not participate in the regulatory sandbox. While Standard Chartered deeply engaged in sandbox testing through Anchorpoint, HSBC concentrated its blockchain investments on tokenized deposits—TDS launch, EnsembleTX cross-bank settlement, HSBC Orion bond platform.

In March 2026, Bloomberg reported that HSBC expects to be one of the first approved stablecoin issuing institutions in Hong Kong. This news surprised the industry—not because HSBC was unprepared, but because there was a clear strategic reservation internally regarding stablecoins.

The reservation stems from a structural judgment: tokenized deposits are the digitization of bank liabilities, keeping funds on the balance sheet without weakening the bank's deposit base; stablecoins require 100% reserve assets to be isolated in custody, pulling customer funds out of the bank deposit system—this is a substitute for bank deposits from a monetary structure perspective, not a supplement. HSBC's CEO stated: "Tokenized deposits will not weaken the monetary multiplier effect like stablecoins." Citigroup predicts that bank tokens could reach a transaction volume of $100-140 trillion by 2030, surpassing public stablecoins. This is precisely where HSBC's long-term bet lies.

However, this logic encounters boundaries in Hong Kong's cross-border payment scenarios. Tokenized deposits are a closed system, with debts pointing to HSBC, and cannot circulate outside of HSBC's system; stablecoins can be used across platforms and chains. In the China-Southeast Asia trade corridor, enterprises need a settlement tool that is acceptable across multiple platforms, not just quick transfers within HSBC. HSBC's application for a stablecoin license acknowledges this reality. Two legs, a pragmatic choice.

HSBC's infrastructure is already in place: the Orion bond platform has issued over $3.5 billion, TDS covers Hong Kong, Singapore, the UK, and Luxembourg, and EnsembleTX has completed its first cross-bank real-time transfer of HKD 3.8 million. The stablecoin license adds an open circulation layer to this infrastructure, rather than starting from scratch.

3.4 Bank of China Hong Kong: Strategic Depth from Different Dimensions

The strategies of Standard Chartered and HSBC essentially extend the global on-chain financial layout to Hong Kong. Bank of China Hong Kong's value comes from another dimension—not a global network, but its structural position within the Hong Kong financial system.

Bank of China Hong Kong is one of the three issuing banks of the Hong Kong dollar and also one of the most important clearing banks for offshore RMB (CNH), with most CNH cross-border transactions cleared through it. This clearing bank identity has operated for decades and is extremely difficult to replace—its value does not come from a global network or technological accumulation, but from its institutional anchor point in the offshore RMB ecosystem. This position itself is an asset; what products to issue is a later discussion.

Currently, Bank of China Hong Kong's public actions are almost zero—no participation in the sandbox, no establishment of joint ventures, and no release of research reports or white papers. Against the backdrop of Standard Chartered and HSBC's successive public statements, this silence is more noticeable. But silence does not equate to absence; for an institution with a structural position in the offshore RMB ecosystem, it is naturally more cautious about any actions involving RMB-related digitalization than purely multinational commercial banks.

3.5 Three-Way Comparison: Same Starting Point, Three Strategic Positions

The three issuing banks of the Hong Kong dollar have the same starting point: decades of experience in issuing Hong Kong dollar banknotes, supported by 100% US dollar reserves—this is completely aligned with the reserve logic of stablecoins and is a regulatory trust foundation that no other participant can replicate. However, after the same starting point, the target levels of the three paths are entirely different.

HSBC's entry has changed the landscape. In March 2026, HSBC transitioned from "indirect layout" to directly applying for a license, expected to become one of the first approved institutions alongside Standard Chartered's Anchorpoint, with OSL also possibly in the mix. There is competition between Standard Chartered and HSBC at the product level—Anchorpoint focuses on open circulation and cross-border scenarios, while HSBC's stablecoin is backed by tokenized deposit infrastructure, possibly leaning more towards institutional treasury. However, at the infrastructure level, both are co-builders: Anchorpoint's stablecoin may operate on the EnsembleTX interoperability layer built with HSBC's participation. Bank of China Hong Kong is still waiting in another dimension.

The three licenses correspond to three different strategic directions.

IV. Three Paths to Implementation

With licenses in place and issuing entities entering the arena, the real question is: who will use the Hong Kong dollar stablecoin, and where will it be used?

A payment from Malaysia to Hong Kong illustrates the position of the Hong Kong dollar stablecoin in the sandwich structure. The buyer exchanges ringgit for US dollar stablecoins, with on-chain transfers arriving in minutes—the cross-border corridor is resolved by USDC/USDT, which is the main stage for US dollar stablecoins. However, once the trader receives the US dollar stablecoins, they still need to exchange them for Hong Kong dollars to pay suppliers in the Greater Bay Area and to pay local employees' salaries.

This "final step" is not a technical issue, but a structural issue—the Hong Kong dollar is the true base currency for intermediaries in Hong Kong trade. Behind this is an annual trade total of $1.35 trillion (with the mainland and ASEAN accounting for 65%), with approximately $3.7 billion worth of goods flowing through Hong Kong daily, each transaction requiring this "final step."

The first layer of the cross-border corridor is already occupied by US dollar stablecoins, which have the largest volume and deepest liquidity. The position of the Hong Kong dollar stablecoin is in the second layer: local currency prices the local market.

The logic of implementation for the three paths is entirely different: the B-end cross-border trade pain points are clear, and users are ready, making it the most likely scenario to complete commercial validation in one to three years; the C-end retail has a low volume ceiling, focusing more on brand recognition accumulation; the financial market (RWA settlement currency) has the greatest strategic depth, but the infrastructure cycle is the longest.

4.1 B-End Cross-Border Trade: Fastest Validation, Most Real Pain Points

What specifically slows down the "final step" mentioned in the introduction? According to Finextra's analysis, 90% of high-value B2B payments reach the beneficiary bank within an hour—the cross-border pipeline itself is not slow. What is slow is the last mile: after funds reach the destination bank, they must still go through local clearing, compliance checks, and manual reconciliation, which often takes hours or even days.

Stablecoins solve precisely this segment—integrating data and value into a single programmable flow, with invoices, reconciliations, and automatic payment triggers all completed on-chain. The global market is already validating this path: B2B payments account for about 60% of the real payment volume of stablecoins, and 43% of B2B cross-border payments in Southeast Asia have used stablecoins for settlement.

The improvements are substantial: real-world data from the sandbox phase shows that a supplier payment has been reduced from 3 days to 8 minutes, with exchange costs dropping by 45%; in cross-border tests with Hong Kong-registered companies, costs were reduced by nearly 90%. This is not a concept validation, but a record of real transactions already completed.

The Hong Kong dollar has advantages in this scenario that US dollar stablecoins cannot replace:

• Compliance Channel: USDT has long been in a gray area for cross-border settlements in the mainland, while licensed Hong Kong dollar stablecoins provide complete KYC/AML audit records— in 2024, a Shenzhen company was fined RMB 8 million by the foreign exchange authority for transferring funds through fictitious trade contracts, highlighting the real compliance costs.

• Quasi-US Dollar Stability: The linked exchange rate system anchors the value, and Southeast Asian traders accepting Hong Kong dollar settlements is equivalent to accepting US dollars, eliminating the need for hedging. Licensed Hong Kong dollar stablecoins are not just a faster settlement tool, but a complete cross-border payment entry with built-in KYC/AML, regulatory filing, and bank-level reserve custody.

Once this infrastructure is established in the China-Southeast Asia corridor, there are already a number of cross-border settlement platforms focused on Chinese foreign trade enterprises processing hundreds of billions of dollars monthly; what they lack is not users, but a compliant and regulatorily accepted stable digital settlement tool.

However, resistance is real. The fiat currency channel is still sufficient, and there are operational costs for enterprises to switch to stablecoin settlements; inertia will not break automatically. The concerns of mainland enterprises are more specific: whether licensed Hong Kong dollar stablecoins require additional foreign exchange authority filings for cross-border settlements currently has no clear answer—compliance advantages are built on a premise that has yet to be formally confirmed. The receiving party is also a variable: Southeast Asian suppliers need to be willing to accept and have the ability to convert back to local currency, and the inbound and outbound infrastructure is still not perfect in some corridors. There is also an internal contradiction that must be faced: while Standard Chartered promotes Anchorpoint, it is also collecting fees through traditional cross-border remittances; how this conflict of interest is resolved internally will determine how much real resource investment Anchorpoint can receive.

4.2 C-End Retail: Frontend vs. Backend, Two Completely Different Logics

The first real commercial revenue from the Hong Kong dollar stablecoin will not come from the C-end—this has already been clarified in the previous section. The C-end is a showcase, not a commercial validation scene. However, the C-end retail is not a single path, but two—different directions, different timelines, and different bottlenecks. Mixing them together in discussion is why C-end landing predictions are always unclear.

First Path: Frontend Path. Users perceive that they are using stablecoins—actively downloading wallets, topping up Hong Kong dollar stablecoins, and scanning to consume at supported merchants. All current retail scenarios in sandbox testing basically belong to this path. The problem is users' rational choices: Octopus, Faster Payment System, and bank apps already have zero friction—why would users want to take an extra step? The essence of the frontend path requires users to actively migrate their habits, while Hong Kong is one of the cities with the most developed global payment infrastructure. This path needs external catalysts—the most likely being government-led institutional tools, such as the digitization of consumption vouchers.

Second Path: Backend Path. The most successful stablecoin C-end applications are those where users are unaware they are using stablecoins. XSGD may have the clearest landing case: Thai tourists pay merchants using local wallets, merchants receive Singapore dollars in real-time, and XSGD completes the settlement in the background, with neither party ever encountering "cryptocurrency." PayPal's PYUSD serves as a backend for SpeedySend remittance services, where users only perceive that "money arrives faster." HSBC Gold Token is the Hong Kong version—users simply buy gold in the app, with blockchain operating behind the scenes. Two ends of fiat currency, with stablecoins in the middle, is a model that is already in operation.

The backend path has several structural constraints that are real ceilings:

• System Integration and Ecological Coordination. Octopus is a closed proprietary NFC ecosystem; transforming existing settlement backends is costly, regulatory complex, and lacks commercial motivation (the integration of e-CNY recharge in February 2025 was driven by policy rather than market). A more realistic option is for each issuer to first land in channels they control: HSBC expands its app's tokenized asset categories, and Anchorpoint uses HKT Tap & Go to create a transparent stablecoin payment backend for users. This can happen within 1-2 years, but it brings a second problem: Standard Chartered's stablecoin needs to be embedded in HSBC's app backend, and HSBC has no motivation to cooperate with a competitor. True scaling in the C-end will only be achieved when multiple ecosystems operate simultaneously—this is not a technical issue, but a business coordination issue.

• Market Volume Ceiling. Stripe data shows that Hong Kong's total digital payment transaction volume is expected to exceed $111 billion in 2025; even if stablecoins account for 1%, that is only about $1.1 billion. HSBC Gold Token has exceeded $1 billion in transaction volume, making it the most successful case of C-end tokenized assets in Hong Kong, but the strategic significance of the C-end for issuers is more about "showcase scenarios and building brand recognition," rather than being a primary source of income.

4.3 Financial Markets: No Barriers for Funds Once Compliance Channels Are Opened

Local currency pricing local markets applies not only to trade—but in financial markets, the Hong Kong dollar is also the most natural on-chain pricing unit for local assets in Hong Kong. Hong Kong manages assets totaling over HKD 31 trillion, with over 70% of global RMB settlements completed through Hong Kong. In 2024, approximately 30% of Asian international bond issuance will be facilitated by Hong Kong—these assets and funds are already flowing, and what is lacking is a more efficient on-chain settlement tool.

In this direction, major global exchanges and clearing institutions have already taken the lead—NYSE, Nasdaq, and DTCC (which processes over $2 trillion in securities settlements daily) are all testing on-chain settlement infrastructure. The role of the Hong Kong dollar stablecoin in Hong Kong follows the same path: it is not about creating new investment products, but about establishing a compliant on-chain settlement channel. Once funds enter the chain through licensed Hong Kong dollar stablecoins, they qualify to flow within Hong Kong's compliant financial system—purchasing tokenized bonds, participating in tokenized funds, and settling RWA assets all fall within the same compliance framework.

In February 2026, the National Development and Reform Commission and seven other departments issued Document No. 42, establishing the domestic assets—overseas issuance—domestic filing compliance path for RWA, with Hong Kong being the natural landing node for this channel. The Hong Kong dollar stablecoin serves as the front-end settlement currency in this structure—from the overseas issuance of domestic enterprise assets to tokenized government bonds (with the largest global digital bond in 2025 being approximately $1.3 billion equivalent), to tokenized physical assets like HSBC Gold Token (with cumulative transaction volume exceeding $1 billion), the Hong Kong dollar is the most natural on-chain pricing and settlement unit.

The premise constraints of this scenario are also real: the filing system of Document No. 42 has just begun in practice, and detailed rules for RWA types other than asset-backed securities tokens are yet to be established; liquidity in the tokenized secondary market remains a bottleneck—without enough buyers and sellers present simultaneously, the efficiency advantages of on-chain settlement cannot be realized; the pace of regulatory coordination between the mainland and Hong Kong ultimately determines the actual speed of this scenario's development. The infrastructure is already in place, but institutional cooperation will take time.

4.4 Three Banks, One Stablecoin, One Set of Infrastructure

Standard Chartered is competing for global trade fund settlements, with Anchorpoint being the front-end landing point of this global cross-border settlement layout in Hong Kong; HSBC is building global financial infrastructure. The nodes they are entering are different, but they serve different usage scenarios of the same stablecoin.

Entering nodes may differ, but they share the same on-chain infrastructure; competition exists at the product level, while collaboration occurs at the settlement level. For the Hong Kong dollar stablecoin, the three paths have an inherent accumulation order: the B-end leads, with trade enterprises using stablecoins for payment settlements, and the front-end completing transactions; funds remain in Hong Kong in the form of Hong Kong dollar stablecoins, creating a compliance fund settlement; the accumulated liquidity supports the depth of financial market RWA settlements; as compliance endorsements accumulate, the C-end backend path will naturally penetrate.

The Hong Kong dollar stablecoin does not need to win all three paths simultaneously. It only needs to establish a real use case in the B-end that no one can deny—other scenarios will follow.

V. Global Reference—Survival Samples of Small Currency Stablecoins

The stablecoin market is highly concentrated. In this landscape, the survival proposition for small currency stablecoins is not "how to compete with US dollar stablecoins," but "how to find a real position in areas not covered by US dollar stablecoins."

The next four cases—UAE, XSGD, EURC, BRLA—validate the two judgments proposed in the first chapter: the small currency stablecoins that survive do not rely on direct competition with the US dollar. They have all found a position that US dollar stablecoins are unwilling to take on, cannot do well, or are not allowed to do, and then established irreplaceability in that position.

5.1 UAE: A Complete Sample of Layered Coexistence

The UAE is currently the most complete example of "coexistence of institutional and retail layers under the same regulatory framework." Two dirham stablecoins, issued by two different issuers, coexist under the same central bank regulation—this is a comprehensive validation of the two judgments. The value of the UAE lies in demonstrating ecological layering: how two stablecoins coexist in one market; the following XSGD demonstrates execution paths: how a single stablecoin goes from zero to scale. The two dimensions are different and do not overlap.

AE Coin: Retail Layer, Daily Consumption Scenarios. Issued by Al Maryah Community Bank, it received full licensing from the UAE Central Bank in December 2024, becoming the first licensed retail dirham stablecoin in the UAE. The landing speed exceeded expectations: in December 2025, it signed a contract with ADNOC Distribution, covering nearly 980 gas stations and Oasis convenience stores in the UAE, Saudi Arabia, and Egypt; in October 2025, the Dubai government's finance department began piloting AE Coin for government service fee payments; it subsequently extended to Abu Dhabi taxi and flight booking scenarios. Chainalysis data shows that 93% of stablecoin transfers in the UAE are retail-scale, confirming AE Coin's core positioning. Users paying at gas stations do not perceive the existence of stablecoins—the front end remains unchanged, while the back end switches to on-chain, which is a real version of the backend path discussed in Chapter Four. A cautionary tale is Brazil's cREAL: relying on incentives for volume, it plummeted over 90% after incentives shrank—scenarios are the moat, incentives are not.

DDSC: Institutional Layer, High-Value Settlement and Trade Supply Chain. Issued by IHC (Abu Dhabi Diversified Holdings, with assets exceeding $50 billion) in collaboration with First Abu Dhabi Bank, it received approval from the UAE Central Bank to launch in February 2026. Its positioning is entirely institutional: high-value payments and settlements, treasury management, and trade supply chain circulation. The roadmap extends beyond the UAE—starting with dirhams, expanding to other GCC currencies, and connecting to Africa through M-Pesa infrastructure, aiming to build a compliant regional settlement network across MENA, Africa, and Asia.

A key design in UAE regulation is that after the transition period of PTSR ends in July 2025, merchants in the UAE can only accept central bank-approved dirham stablecoins for daily payments; foreign stablecoins (USDT, USDC) can only be used in the virtual asset trading ecosystem and cannot be used for merchant payments. Local stablecoins protect payment sovereignty, while foreign stablecoins are limited to capital markets—Judgment One (layering does not compete) has become institutional design in the UAE, not just a market phenomenon.

5.2 XSGD: A Pioneer in Cross-Border Settlement Layer

While the UAE showcases ecological layering within a market, XSGD demonstrates another dimension: a complete execution path for a single small currency stablecoin from regulatory landing to scaling. StraitsX holds a major payment institution license issued by Singapore's MAS, and XSGD currently operates on seven chains: Ethereum, Polygon, Avalanche, Arbitrum, Zilliqa, Hedera, and XRPL, with reserves managed by Standard Chartered Bank and DBS Bank. StraitsX's stablecoins (XSGD + XUSD) have accumulated over $18 billion in on-chain transaction volume.

XSGD's scenarios cover a wider range than typically recognized: cross-border retail FX in collaboration with Alipay+ and Grab (Thai tourists scan to pay merchants in Singapore, with XSGD doing real-time FX settlement in the background, and merchants receiving Singapore dollars); institutional-level B2B cross-border payments and treasury settlements, integrating Singapore FAST, PayNow, and SWIFT through APIs; it is set to launch on Solana in early 2026, aiming for on-chain FX and institutional cross-border settlements, with SGD/USD being exchanged in real-time on the same chain without traditional intermediaries. This is not just about remittance landing, but a comprehensive layout in the cross-border settlement layer.

There is a deeper issue than the difference in layers: XSGD and the Hong Kong dollar stablecoin have real layer overlaps in serving the China-Southeast Asia corridor— from the perspective of Southeast Asian buyers, both are compliant Asian local currency settlement tools with similar functions. Singapore has been ahead for two years, with user recognition already accumulated in this corridor. However, the Hong Kong dollar stablecoin has two differentiators that XSGD does not possess: regulatory cross-border effectiveness (pegging to the Hong Kong dollar requires licensing, regardless of issuance location) and the potential connection to offshore RMB.

Standard Chartered is simultaneously the reserve custodian for both XSGD and Anchorpoint—this is not a conflict of interest, but a dual-node layout of a global bank: the Singapore node serves Southeast Asian remittances and retail FX, while the Hong Kong node serves China-Southeast Asia trade settlements. The development trajectory of XSGD is the most direct execution reference for the Hong Kong dollar stablecoin: from regulatory landing to multi-chain deployment, from institutional B2B to retail FX—this is the path the Hong Kong dollar stablecoin must also take, but it is already two years behind.

Another larger perspective worth noting here is: if JPYC (Japanese yen), XSGD (Singapore dollar), and the Hong Kong dollar stablecoin are deployed on the same public chain, a multi-currency settlement corridor between Northeast Asia and Southeast Asia will take shape—three Asian local currency stablecoins can directly exchange without going through a US dollar intermediary. This scenario does not require any party to replace the US dollar; it only needs three compliant stablecoins to coexist in the same on-chain ecosystem. The threshold is lower than imagined, and the timeline is closer than imagined.

5.3 EURC: Compliance as an Accelerator, Not a Barrier

EURC (Euro, issued by Circle) is currently the largest non-US dollar small currency stablecoin globally, with its core scenarios in the institutional layer: EURC/USDC is a mainstream FX trading pair in DeFi, with protocols like Aave and Morpho using it for lending collateral, and enterprises using it for payroll and supplier settlements within the Eurozone.

The most valuable data point for EURC is the timeline comparison: before MiCA takes effect in June 2024, the overall market value of euro stablecoins shrank by 48%, with institutions generally on the sidelines; after MiCA's implementation, the market value doubled within 12 months, with monthly trading volume jumping from $383 million to nearly nine times that, and EURC's own trading volume increasing by 1,139%. EURC's market share rose from 17% to 42%, and by March 2026, it further surpassed 50%, with a market value exceeding $450 million, becoming the dominant euro stablecoin—Circle had already obtained electronic money institution authorization in France before MiCA took effect, making it the most prepared issuer for compliance, and EURC absorbed a large amount of traffic after non-compliant stablecoins were delisted from mainstream exchanges. During the same period, 58% of European institutions were already using or planning to incorporate stablecoins into their payment processes.

However, analysis from the East Asia Forum also directly points out another side of this proposition: despite legal clarity, euro stablecoins have still not been able to challenge US dollar stablecoins in terms of liquidity and network effects—compliance opens the door, but inside the door, one still needs to find a specific, irreplaceable position. The position EURC found is in eurozone trade settlements, without directly competing with US dollar stablecoins. The transmission mechanism of "compliance landing → institutional influx" is universal: the Hong Kong "Stablecoin Ordinance" landing in August 2025 can produce a similar catalytic effect for the Hong Kong dollar stablecoin's B-end path.

This transmission mechanism extends beyond the B-end corridor: EURC's role in lending collateral on Aave and Morpho is the euro version of the RWA scenario discussed in Chapter Four—compliance not only opens the door to trade channels but also serves as a passport for accessing on-chain financial markets.

5.4 BRLA: B2B Breakthrough for Non-Mainstream Currencies

BRLA is the case among the four that has the most direct reference significance for the B2B path of the Hong Kong dollar stablecoin: a non-mainstream reserve currency, with no natural global demand, relying on compliance and local payment system integration to establish a moat. The Brazilian real stablecoin issued by BRLA Digital serves as a compliant bridge for "USD in, real out." BRLA-USDC is the largest local currency/USD DEX trading pair in Latin America, with cumulative transactions of approximately $97.5 million; the monthly trading volume of Brazil's B2B stablecoin has grown from less than $100 million to over $3 billion by 2025, an increase of over 30 times—the sector itself is rapidly growing.

BRLA's moat is very specific: PIX integration. PIX is an instant payment system launched by the Brazilian central bank, covering almost all Brazilian bank accounts, and BRLA seamlessly connects on-chain US dollar stablecoins with the local financial system through PIX. PIX for BRLA is akin to Faster Payment System for the Hong Kong dollar stablecoin—deep integration with local payment systems is the most direct path for non-mainstream currency stablecoins to establish irreplaceability in the B-end.

Challenges also exist: scale growth relies on the repeated use of B2B clients, with a slow rhythm; in December 2025, the Brazilian stock exchange B3 announced it would issue institutional-level real stablecoins, and competition is about to escalate. For the Hong Kong dollar stablecoin, the corresponding challenge is that the boundaries of its connection with the mainland's foreign exchange authority system have not yet been clarified. However, there is a positive signal worth noting in the Brazilian ecosystem: cREAL and cKES (Kenyan shilling) have already formed direct trading pairs on the Celo chain, with cumulative transactions of approximately $24.9 million—two local currency stablecoins bypassing the US dollar intermediary for direct exchange, this path is already being traversed.

5.5 From Cases Back to Judgments: The Position of the Hong Kong Dollar Stablecoin

The four cases point to the same conclusion: the survival of small currency stablecoins does not rely on direct competition with the US dollar, but on finding a specific layered position within the sandwich model—compliance is the ticket to entry, integration with local payment systems is the moat, and scenario binding is the fundamental basis for user retention. The uniqueness of the Hong Kong dollar stablecoin within this framework has already been clarified in the first chapter. The four cases have transformed the two judgments from concepts into data.

The position is already visible. The next question is: once this position is occupied, how to make money.

VI. The Business Logic of Issuers—Whoever Controls the Channel Makes Money

Licenses solve the question of "can it be done," not "how to make money."

The global stablecoin market is undergoing a paradigm shift, and this shift has an underlying logic: whoever controls the channel of capital flow makes money. Reserve interest is the starting point; the channel is the endpoint. This logic has been validated from four different dimensions by Circle's IPO arc, JPMorgan's Kinexys, Visa/Mastercard's network strategies, and the branding experiments of consumer enterprises.

This chapter starts from these four dimensions and ultimately returns to the Hong Kong dollar stablecoin: a three-tiered channel, an evolutionary path.

6.1 Circle: A Forced Transformation

Circle's business model issues are laid out in the S-1, in black and white. In 2024, revenue was $1.7 billion, paying $1 billion to distribution partners—of which Coinbase alone took $900 million. For every dollar Circle earns, nearly 60 cents go to the channel. This is not a strategic choice, but structural bleeding.

More critically is the revenue structure: 95%-99% of 2024's revenue came from reserve interest, and this proportion did not change significantly throughout 2025—Q4 reserve income was $733 million, with other income only $37 million, with reserves still accounting for about 95%. The market value of USDC is expected to reach approximately $75.3 billion by the end of 2025 (a year-on-year increase of 72%), with Q4 on-chain transaction volume at $11.9 trillion (a year-on-year increase of 247%)—scale is exploding, but the monetization model has not kept pace. Two fatal flaws follow—if interest rates drop by 100 basis points, annual revenue directly decreases by about $441 million; scale expansion relies on channels, but channel costs erode almost all profit margins. This model is extremely lucrative in a high-interest-rate cycle but cannot withstand interest rate declines or channel backlash.

The capital market has priced this contradiction very clearly. The IPO surge to $299 was a scarcity premium and emotional bubble, plummeting 78% to $49.90 was a discount based on "reserve interest arbitrage institutions," and the subsequent rebound to $126 was the market's first attempt to price the transformation path—the trigger point was Q4 earnings exceeding expectations (EPS $0.43 vs. expected $0.16) and the continuous growth of CPN channel scale (annualized transaction volume of $5.7 billion, with 55 financial institutions onboarded). Circle's total revenue for 2025 is projected to be $2.7 billion (a 64% increase), but reserve interest still dominates, and channel revenue is still in its early stages. The direction is clear: relying on reserve interest cannot sustain a company that needs to be valued based on infrastructure.

6.2 Kinexys: The Logic of Channel Fees Has Not Changed, Just the Tracks

JPMorgan is not doing stablecoins; this is the premise for understanding Kinexys. JPMD (JPM Coin) is tokenized bank deposits—backed by JPMorgan's balance sheet, it can pay interest (the GENIUS Act prohibits stablecoins from paying interest, but does not prohibit deposit tokens from paying interest), and institutional clients view it as a bank account rather than transferring funds to a reserve pool held by a non-bank issuer.

Since 2019, Kinexys has provided deposit accounts for institutional clients on a private chain, processing over $30 trillion in tokenized transactions, with daily volumes exceeding $5 billion. The business model is very clear: deepening deposit relationships, institutional settlement channel fees, and collateral management fees. This logic is entirely the same as in the SWIFT era—JPMorgan has never earned interest from holding funds, but rather from channel fees for capital flow. The only difference is the track: from SWIFT/Fedwire to blockchain.

The biggest difference between Kinexys and Circle is not in technology, but in starting points. Kinexys product head Basak Toprak stated directly: deposit tokens keep funds on JPMorgan's balance sheet, and corporate finance managers know the accounting treatment and understand counterparty risks, requiring no behavioral changes. JPMorgan already has $10 trillion in daily settlement volume, existing customer relationships, and established charging logic; moving on-chain is merely migrating existing customers to a more efficient track; Circle is building a distribution network from scratch, incurring channel costs with every step of expansion. The same blockchain, two completely different economics.

For Hong Kong: issuers holding bank licenses are naturally closer to the Kinexys path. They do not need to build a distribution network from scratch; they only need to move their existing institutional customer relationships onto the chain. The B-end cross-border trade corridor is the fastest channel for such issuers to validate.

6.3 Visa/Mastercard: Stablecoins Are New Currency, Not New Networks

There is a fundamental misunderstanding about Visa and Mastercard: that stablecoins will disrupt card organizations. This judgment misjudges the role layer.

Visa has never held funds and does not earn interest—it earns channel fees for every capital flow. The network itself does not care what currency is circulating; it cares whether the transaction has passed through its routing, clearing, and dispute resolution systems. Stablecoins are merely a new form of currency circulating on this existing network, not a reason to replace this network.

Visa faces a clear strategic choice: issue a Visa-branded stablecoin, becoming one of many airlines; or integrate all stablecoins into the Visa network, becoming the airport that all airlines must pass through. Visa chose the airport. In December 2025, Visa officially launched USDC settlement in the US, operating on Solana, with annualized settlement volume exceeding $3.5 billion—not creating cross-border payment products, but embedding stablecoins into its core settlement layer. Regardless of which issuer wins, Visa benefits. The hub's position is indifferent to which spoke wins.

Mastercard is taking the same path: not betting on which chain wins, but making compliance verification and dispute resolution a trust layer that all stablecoins must connect to.

For the Hong Kong dollar stablecoin: the Visa/Mastercard network is an existing distribution infrastructure, and the threshold for licensed Hong Kong dollar stablecoins to access this network is much lower than building a network from scratch.

6.4 Consumer Enterprise Brand Stablecoins: Tokens Are Just the Foundation, Business Models Are the Core

What Western Union, Klarna, and Sony Bank are doing is completely different from Circle—they are not issuing a new stablecoin to earn reserve income, but embedding stablecoins into their existing customer transaction processes to enhance ARPU, control transaction data, and embed custom incentives. KPIs are not market value, but unit economic benefits within the ecosystem.

This logic is clear: for decades, enterprises had no choice but to use third-party payments, handing profits over to Visa/Mastercard/Alipay and relinquishing all transaction data. Brand stablecoins are the first time enterprises can design their own currency layer—in a closed ecosystem, this means: extracting more value from customer activities (balances and traffic), embedding custom incentives (loyalty, targeted promotions), having complete transaction data, and not being subject to third-party settlement paths.

PYUSD is the clearest warning on this path—not a failure, but a struggle stuck in an intermediate state. In July 2025, PayPal announced that PYUSD had entered over 70 markets and partnered with Fiserv to promote global deployment, with distribution channels being quite broad; however, the core issue of PYUSD has never been resolved: it is an accessory to the product, not a core component of the product—users use PayPal not because of PYUSD; PYUSD is merely an occasionally available option. The success of brand stablecoins hinges not on "having users," but on "stablecoins being an indispensable layer in the core transaction process for users." Having channels without a core scenario is an accessory; having channels with a core scenario is a moat.

For Hong Kong: this path is currently almost blank. Chinese consumer platforms have withdrawn on a large scale due to pressure from mainland policies—from 77 expressing interest to 36 formally applying, and now expected to be only a few approved, the absence of consumer enterprises is the most significant structural gap in the Hong Kong dollar stablecoin ecosystem. Whoever first uses brand stablecoins to truly control a high-frequency consumption scenario will establish a C-end moat.

6.5 Returning to the Hong Kong Dollar: Three Markets, Three Charging Logics

Stablecoins connect three massive markets: payments, lending, and capital markets. Each market corresponds to different charging logics and different entry thresholds. Where the issuers of the Hong Kong dollar stablecoin cut in depends on their starting point.

The four paths are not in a progressive relationship but are single-point breakthroughs. No issuer will simultaneously advance all four paths; rather, they will cut in from their own advantages, first establishing an irreplaceable channel, and then extending to other directions.

The B-end corridor is currently the clearest answer—it does not require consumer education, does not need a retail acceptance network, and only requires both enterprises to be willing to settle in Hong Kong dollars. Issuers holding bank licenses and already having Greater Bay Area trade clients are the most likely to first run through this path. The constraints faced by the Hong Kong dollar stablecoin—low interest rates, small market, and strict regulation—are not excuses; they are precisely the spaces for differentiation: low interest rates push issuers to move towards channel models sooner, a small market means the B-end corridor can be validated faster than C-end consumption, and strict regulatory barriers mean that whoever first establishes a compliant channel will have the hardest-to-catch first-mover advantage. C-end consumption and RWA lending will follow the volume of the corridor.

What the Hong Kong dollar stablecoin needs is to occupy an irreplaceable channel—and this channel is already visible.

VII. Conclusion—The Story of the Hong Kong Dollar Stablecoin Truly Begins Here

The first batch of licenses is about to be issued. This is a starting point, not an endpoint.

In the next two to three years, the Hong Kong dollar stablecoin will find its first real users in the China-Southeast Asia trade corridor, accumulate the first batch of on-chain liquidity in Hong Kong's RWA settlement layer, and complete the first validation of the backend path in a high-frequency consumption scenario. These will not happen simultaneously, nor do they need to happen simultaneously—each breakthrough will pave the way for the next.

But the real turning point is not the first transaction—it is the first enterprise deciding to leave operational funds in the Hong Kong dollar stablecoin overnight, rather than immediately converting back to fiat after each settlement. When settlement becomes holding, stablecoins transition from payment tools to financial infrastructure. This turning point has yet to occur among all non-US dollar stablecoins globally. XSGD has not, EURC has not, and BRLA has not—enterprises use them and leave, with no one treating local currency stablecoins as a harbor for funds. If the Hong Kong dollar stablecoin can take the lead in breaking through this step, its economics will shift from channel fees to balance management, fundamentally altering its valuation logic.

Larger questions remain further afield: the potential for offshore RMB stablecoins, the evolution path of RMB internationalization in the digital age, and Hong Kong's long-term positioning as a global compliant digital financial hub. The answers to these questions are beyond the scope of this report—but every step of the Hong Kong dollar stablecoin is creating conditions for the answers to these questions.

The final question is not "can the Hong Kong dollar stablecoin succeed," but "who will occupy that position." The answer is being written down.