The Hong Kong Stablecoin Ordinance, which came into effect on August 1st, has accelerated the push by internet giants like JD.com and Ant Group to enter the stablecoin market.
Stablecoins are a type of digital currency pegged to real-world assets. Their value is typically tied to a fiat currency, commodity, or other asset. Unlike volatile cryptocurrencies such as Bitcoin, stablecoins are designed to maintain a relatively stable price, functioning much like "electronic cash" in the digital world.
First introduced in 2014, the global stablecoin market was valued at just $20 billion in 2020, representing its initial phase. Since then, stablecoins have experienced rapid growth driven by two key factors: over 90% of Bitcoin transactions are settled using stablecoins like USDT or USDC, making them a de facto "crypto-dollar standard." Additionally, in emerging economies such as Argentina, stablecoins have become a "digital safe-haven asset" for ordinary citizens, accounting for up to 72% of cryptocurrency trading volume in these regions.
Richard Liu, founder of JD.com, recently announced that the company is preparing to apply for stablecoin licenses in major currency jurisdictions worldwide. With these licenses, JD.com aims to facilitate global inter-corporate foreign exchange services, significantly reducing cross-border payment costs. The plan could potentially cut international payment expenses by up to 90% while improving settlement times to under 10 seconds.
JD.com stated that the Ordinance marks the formal integration of stablecoins into a regulated legal framework. As a participant in the Hong Kong Monetary Authority's sandbox for stablecoin issuers, JD Coin Chain committed to full compliance with the regulation. The company is actively engaging with global partners and regulators to develop more application scenarios and build a healthy, compliant industrial ecosystem.
Similarly, Ant International indicated on June 12th that it would submit its license application shortly after the Ordinance took effect. The company revealed accelerated investments in global treasury management and partnerships, aiming to deploy its AI, blockchain, and stablecoin innovations in large-scale practical applications.
Current market participants generally fall into three categories: internet platforms, payment institutions, and traditional banks. On June 16th, Lakala announced its planning for an overseas IPO on the Hong Kong Stock Exchange, a move industry observers interpreted as positioning for the stablecoin market. Meanwhile, LianLian DigiTech (Stock Code: 02598.HK) has seen its share price rise steadily amid positive market sentiment around stablecoins.
When asked about applying for a Hong Kong stablecoin license, Zhejiang China Commodities City Group (Stock Code: 600415.SH) responded that as the operator of the world's largest small commodities market, it naturally possesses massive, high-frequency cross-border trade settlement scenarios. The company stated that innovative payment tools like stablecoins hold significant potential to provide more efficient, lower-cost cross-border payment solutions for global merchants, particularly small and medium enterprises. Its cross-border payment platform, Yiwu Pay, will closely monitor regulatory developments and actively evaluate submitting an application once the pathway is clear.
Notably, David Pakman, a partner at crypto-native investment firm CoinFund, has publicly stated that the global stablecoin supply could exceed $1 trillion by the end of 2025, potentially serving as the next major catalyst for growth in the cryptocurrency market.
Currently, the United States and Hong Kong are leading the development of stablecoin regulations. In Hong Kong, the HKMA unified the oversight of stablecoin issuance, implementing a licensing system with strict entry requirements. Issuers must hold sufficient reserve assets with a market value at least equal to the face value of the coins in circulation. Earlier in 2024, the HKMA launched a sandbox for stablecoin issuers, with the first batch of participants including JD Coin Chain, RD InnoTech, and a joint venture established by Standard Chartered Hong Kong, Animoca Brands, and HKT.
Industry experts view the pursuit of Hong Kong stablecoin licenses as a strategic move by JD.com, Ant Group, and other tech giants in the competitive cross-border payments market. Within the stablecoin ecosystem, issuers can raise capital at zero cost on the liability side while investing in highly liquid, low-risk assets to earn interest spreads. However, the stablecoin industry is still in its early developmental stages. While growth potential is high, the practical applications and ultimate impact of these licenses across various sectors remain to be seen.
Understanding Stablecoins and Their Function
Stablecoins represent a significant innovation in digital finance by combining the technological benefits of cryptocurrencies with the stability of traditional assets. They enable seamless transactions without the price volatility associated with conventional digital currencies.
Most stablecoins maintain their peg through various mechanisms. Some hold reserves in fiat currencies or low-risk securities, while others use algorithmic formulas to control supply and demand. This diversity in design allows for different risk profiles and use cases, from everyday payments to complex financial operations.
The transparency of reserve holdings has become a critical issue for regulators and users alike. Regular audits and public reporting are increasingly standard requirements for licensed issuers, ensuring that each stablecoin in circulation is fully backed by its promised assets.
The Role of Major Corporations in Stablecoin Development
Large technology and financial firms bring substantial resources and user networks to the stablecoin space. Their involvement signals a maturation of the market and increased institutional confidence in digital currency applications.
These corporations are particularly interested in streamlining their own payment infrastructures and creating new financial services for their customers. By leveraging stablecoins, they can reduce transaction costs, improve settlement times, and enhance overall efficiency in both domestic and international transfers.
The entry of established companies also introduces greater regulatory compliance and consumer protection measures. Unlike some early cryptocurrency projects that operated in regulatory gray areas, these corporate initiatives are designed from the ground up to meet existing financial regulations.
Global Regulatory Approaches to Stablecoins
Different jurisdictions have adopted varied approaches to stablecoin regulation. The European Union's MiCA framework, the United States' ongoing legislative discussions, and Hong Kong's Ordinance represent three distinct regulatory models emerging across global markets.
Hong Kong's regulatory framework emphasizes strict reserve requirements and segregation of customer funds. The licensing process involves comprehensive review of the applicant's financial stability, operational capabilities, and compliance systems before approval is granted.
This regulatory diversity creates both challenges and opportunities for global companies seeking to issue stablecoins across multiple markets. Navigating these different requirements will require significant legal expertise and adaptive business models.
Frequently Asked Questions
What exactly is a stablecoin?
A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a specific asset or basket of assets, most often traditional fiat currencies like the US dollar. This stability makes them suitable for everyday transactions and value storage, unlike more volatile cryptocurrencies.
Why are major companies interested in issuing stablecoins?
Large corporations see stablecoins as a way to improve their payment systems, reduce transaction costs, and create new financial products for their customers. Explore more strategies for understanding how businesses leverage digital currencies. The licensing also represents a new potential revenue stream through financial services.
How does Hong Kong's regulatory approach differ from other regions?
Hong Kong has implemented a comprehensive licensing regime with strict reserve requirements and direct oversight by the Hong Kong Monetary Authority. This contrasts with some jurisdictions that have taken a more fragmented approach or are still developing their regulatory frameworks.
Are stablecoins safe to use?
Licensed stablecoins that fully back their tokens with appropriate reserves and undergo regular audits can be relatively safe. However, users should still research specific stablecoin issuers, their reserve composition, and regulatory status before use.
What applications do stablecoins have beyond cryptocurrency trading?
Stablecoins enable cheaper and faster cross-border payments, facilitate programmable money through smart contracts, serve as a digital safe haven in economically unstable regions, and provide financial access to unbanked populations through digital wallets.
When will these corporate stablecoins become widely available?
Most corporate stablecoin projects are still in the development or regulatory approval stage. Widespread availability will depend on regulatory processes, with some projects potentially launching in limited form within the next 1-2 years as companies view real-time tools for market development.