Policy Changes Could Restrict Chinese Firms in Hong Kong's Stablecoin Sector

Hong Kong is moving to position itself as a regulated hub for crypto and stablecoins, but reports indicate that major mainland-linked companies and financial institutions operating in the city may face restrictions on stablecoin and other cryptocurrency activities, a move that could reshape participation in Hong Kong’s digital asset market.

Stablecoin Participation by Mainland Firms Limited

Hong Kong implemented a new framework for stablecoins on August 1, including a six-month transition period for businesses to adapt. Reports indicate that 77 institutions have already expressed interest in applying for licenses, showing strong early engagement.

Yet recent reports suggest that the participation of mainland-linked firms may now be constrained. Caixin, a local financial news outlet, reported that Chinese state-owned companies, major internet firms, and banks with operations in Hong Kong could be required to scale back or refrain from participating in cryptocurrency and stablecoin activities, potentially limiting their role in the market.

A senior financial industry figure, speaking to Caixin, indicated that these institutions are likely to postpone submitting applications in response to the policy shift, as another source noted that Hong Kong’s stablecoin sector remains at an early stage with an uncertain outlook, prompting caution among large players considering entry.

This development comes after reports that HSBC, which has an extensive presence in Hong Kong, and ICBC, the world’s largest bank by assets, were preparing to seek stablecoin licenses. The reported restrictions now put those plans in doubt.

Private Firms Move Ahead Amid Regulatory Uncertainty

Even before the policy adjustment, some private Chinese companies had already made preparations for stablecoin ventures. JD.com is exploring stablecoin activity in Hong Kong by establishing business units connected to potential projects, while Ant International set up similar operations in Hong Kong and Singapore mid-year.

Meanwhile, Chinese authorities have taken a mixed approach to stablecoins, creating uncertainty for the sector. At the start of August, regulators reportedly told domestic firms to pause publishing research and holding seminars to curb growing interest in digital currencies among local investors. 

Later in the month, sources indicated that yuan-backed stablecoins could be permitted for the first time, encouraging international use of the currency.

Stablecoin Market Faces Mixed Signals from Regulators

Prior to the latest update, Caixin revealed that the Hong Kong Monetary Authority was considering lowering capital requirements for banks dealing with digital assets, viewing it as a step toward aligning with international standards and strengthening the city’s position as a digital finance hub.

The most recent policy developments now create a complex environment for Hong Kong’s stablecoin sector:

• Hong Kong appears to be moving ahead with its stablecoin licensing system, demonstrating its commitment to building a regulated digital asset hub.
• However, the latest policy shift indicates that major mainland-linked financial institutions are expected to step back from the market, limiting their involvement.
• Without their participation, Hong Kong’s stablecoin market may develop primarily through private companies and international firms.

Stablecoins, which are digital tokens tied to assets such as the U.S. dollar or potentially the yuan, are widely seen as bridging traditional finance and the crypto world. Hong Kong’s framework reflects an effort to capture this emerging market, but the scale of participation from Chinese institutions remains uncertain.