CGS International
Date of Report: August 20, 2025

Hong Kong Stablecoin Revolution: Opportunities, Risks, and Winners in the Next Phase of Digital Finance

Executive Summary: Regulatory Catalysts Ignite Stablecoin Growth in Hong Kong

The Hong Kong stablecoin landscape is on the cusp of transformation following the introduction of the Stablecoin Ordinance on August 1, 2025. This landmark regulation provides regulatory certainty, creates a pathway for licensing, and positions Hong Kong as a front-runner in Asia’s digital asset revolution. The sector is receiving heightened attention from investors, fueled by sharp price rallies in HK-listed stocks connected to stablecoin initiatives and a global boom in stablecoin market capitalization. This article explores the future growth potential, key revenue streams, leading beneficiaries, and the full list of companies impacted by this paradigm shift.

Global Stablecoin Market: Rapid Expansion and New Use Cases

The global stablecoin market achieved a record capitalization of \$261 billion in July 2025, marking 22 consecutive months of growth. The market is dominated by US dollar-pegged coins, but euro and Asian currency-pegged stablecoins are beginning to gain traction. Use cases are evolving beyond crypto trading to include cross-border payments, retail transactions, capital markets, asset tokenization, and even AI-driven payments.

Future Growth Projections: Bullish Momentum and Divergence in Estimates

Estimates for the future size of the stablecoin market diverge significantly, with forecasts for 2028 ranging from \$500 billion (JPMorgan) to \$2 trillion (Standard Chartered, US Treasury), and as high as \$3.7 trillion by 2030 (Citi). Circle, a major issuer, expects a 40% CAGR for its USDC stablecoin over several years. The bulk of demand currently comes from crypto-native activity (trading, DeFi collateral), but payment use cases—especially cross-border—are expected to rise rapidly.

Hong Kong’s Unique Advantages for Stablecoin Adoption

Hong Kong is exceptionally well-positioned for rapid stablecoin growth due to:

• International Financial Centre: Strong wealth management inflows and export/re-export market status.
• Renminbi Liberalization: Gateway for RMB internationalization and offshore CNH flows.
• Remittance Flows: Substantial transfers by domestic helper population to Southeast Asia.
• US\$/HK\$ Peg: Currency stability encourages trust in HK\$- and US\$-pegged stablecoins.
• Regulatory Certainty: New licensing regime enables both local and global players to issue regulated stablecoins for retail and professional investors.

Stablecoin Use Cases: From Crypto Trading to Payments and Beyond

Currently, 88% of stablecoin demand is linked to crypto trading and DeFi activity, but payments—including cross-border remittances, retail, and B2B—are at an early stage and poised for massive expansion. Circle estimates that stablecoins could capture up to 20% of the \$320 trillion global cross-border payments market by 2032, up from 3% today.

Key Revenue Streams in the Stablecoin Ecosystem

• Reserve Management: Issuers earn yield on reserves backing the stablecoins (often US Treasuries or HK\$ deposits).
• Trading Fees: Crypto exchanges and brokers earn trading fees (roughly 0.3% per transaction) and revenue-sharing from issuers for distribution.
• Custody Fees: Banks and custodians charge for managing stablecoin reserves.
• Distribution Fees: Platforms like Coinbase and Binance receive a share of issuer revenues for distributing stablecoins.

Circle’s 2024 US\$ stablecoin reserves yielded 5–6%, with net issuer profit margins of 10–20% after revenue-sharing.

Hong Kong Stablecoin Regulation: Timeline and Impact

The Stablecoin Ordinance, effective August 1, 2025, introduced a licensing regime for fiat-referenced stablecoins. Licensed issuers can market to both retail and professional investors, while unlicensed issuers are limited to professional investors (individuals with assets above HK\$8 million or corporations with portfolios above HK\$8 million or total assets of HK\$40 million).

Companies Benefiting from the Hong Kong Stablecoin Boom

Highlighted Hong Kong & Mainland-Listed Stocks

Recent stablecoin regulatory clarity triggered rallies in the share prices of several HK-listed companies involved in digital banking, custody, or virtual asset trading. Notable beneficiaries include:

• Zhong An Online P&C Insurance (6060 HK): Rose 81% due to ZA Bank’s stablecoin custody expansion and plans to become a distributor.
• Guotai Junan International (1788 HK): Gained 496% after regulatory approval for direct virtual asset trading for retail clients, including stablecoins.
• OSL Group (863 HK): Up 213% YoY, benefiting from digital asset trading platform services.
• China Everbright (165 HK): Up 160% YoY, attributed to virtual asset market exposure.

Additionally, China Daily reported that Huatai International Financial, China Merchants Securities International, and others are seeking virtual asset trading licenses.

Stablecoin Issuer Sandbox: Key Applicants and Use Case Focus

The first batch of sandbox participants included JINGDONG Coinlink Technology, RD InnoTech, and Standard Chartered Bank (Hong Kong) Limited, each proposing use cases such as payments, supply chain management, and capital markets. The HKMA is expected to issue the first stablecoin licenses in early 2026, with a high bar for risk management, technological security, and compliance.

Outlook for HK Stablecoin: Adoption Drivers and Growth Potential

Hong Kong’s status as an international financial hub, its US\$/HK\$ peg, and its role in renminbi liberalization all support potential rapid adoption of HK\$- and US\$-pegged stablecoins. The HKMA emphasizes that only a handful of licenses will be granted at first, prioritizing applicants with robust, real-world use cases—especially those facilitating cross-border settlement.
CNH-pegged stablecoins are being explored, particularly for Belt and Road cross-border payments. Mainland China maintains a ban on crypto trading and mining, but offshore CNH stablecoins are being piloted in partner countries.

Risks and Regulatory Challenges

Key risks include:

• Need for transparency and rigorous oversight of stablecoin reserves.
• Blockchain congestion and fragmentation that could limit scalability.
• Systemic risk if large stablecoin issuers must liquidate reserves rapidly.
• Stringent HK KYC rules may hinder adoption by privacy-seeking users.
• Reluctance among exporters/importers to embrace stablecoin infrastructure.
• Potential for central banks to push back to protect monetary sovereignty and local treasury demand.
• Possible impact on monetary policy transmission and traditional bank deposit bases.

Impact on Traditional Banks

Banks could see both negative and positive effects:

• Negative: Competition for deposits if stablecoins offer yield; pressure on net interest margins and payment-related fee income.
• Positive: Banks issuing stablecoins could earn on reserves and custody; new revenue lines in digital asset services.

In-Depth Analysis: Financial Metrics for Leading Chinese Banks

CGS International retains its Overweight sector call, citing favorable dividend yields versus treasury yields and easing pre-provisioning profit pressures. The top picks are China Merchants Bank (CMB), China Construction Bank (CCB), Industrial and Commercial Bank of China (ICBC), and Chongqing Rural Commercial Bank (CQRCB).

Company Highlights and Analyst Commentary

• China Construction Bank (CCB): Attractive FY25F P/E of 5.6x (lowest among big four, tied with ICBC), 5.4% dividend yield, large H-share free float, and solid appeal to Southbound investors.
• China Merchants Bank (CMB): High-quality management, strong shareholder value track record, and optimism for a rising dividend payout ratio in FY26F-27F.
• ICBC: FY25F P/E of 5.6x, 5.6% dividend yield, strong Southbound investor interest.
• Chongqing Rural Commercial Bank (CQRCB): 20% upside, solid earnings visibility, and a stable dividend profile.

ESG Considerations: Green Finance and Governance Trends

China’s leading banks maintain medium ESG risk—strong in social responsibility and green finance but challenged by governance due to state ownership. Banks are ramping up green financing initiatives, guided by national targets for peak emissions by 2030 and carbon neutrality by 2060. CCB stands out as a top ESG performer, aided by a B- LSEG ESG score.

Conclusion: Hong Kong Stablecoin Market Set for Takeoff

The passing of the Stablecoin Ordinance and impending license issuance in 1Q26 set the stage for a new era in digital finance for Hong Kong. While risks exist, the city’s unique financial landscape, regulatory clarity, and institutional strength create the foundation for rapid stablecoin adoption. Investors should watch both the direct beneficiaries—issuers, virtual asset platforms, and custodians—and the broader impact on China’s largest banks as the stablecoin ecosystem evolves.