Hong Kong’s Regulatory Framework
This framework appears designed to balance innovation with regulatory oversight. The relatively streamlined KYC requirements for smaller transactions and allowance for market-rate fees suggest Hong Kong is positioning itself as a crypto-friendly jurisdiction.
It does so by maintaining prudential safeguards through mandated activities, custodial oversight and relying on knowledgeable personal to guide the Issuer’s Board.
Key Requirements:
- HK$25 million ($3.25 million) paid-up capital for licensing
- High-quality, liquid reserves backing stablecoins
- Segregated asset custody with qualified custodians
- Regular reporting to HKMA (quarterly reviews, daily/weekly updates)
Operational Features:
- Customer Due Diligence responsibility lies with licensees
- Transactions under $8,000 need only occasionally checking
- Industry-standard fees allowed (gas, margins, etc.)
- One-third of board must be independent directors
Financial Benefits for Countries with International Cash
Every currency has a value and a few enjoy international usage. This attribute is very beneficial for the countries involved. If the cash never comes back, then its coins and paper having cost next to nothing have been use for valuable goods and services.
The money is often reused, and it is good for trade. The money is basically an interest free loan.
Two countries dominate this space. The US leads with 58% and followed by the euro 20%. The other three are: Japanese yen 6%, British pound 5% and Chinese renminbi 2%
These currencies offer a confidence of value. Stablecoins, should, be able to do the same given the regular framework that rewards both innovation and prudence.
- Initial Exchange: When a country allows $1 billion in stablecoins to be issued, they receive electronic currency, and the issuer purchases government bonds (T-bills). That is $2 billion for the price of $1 billion.
- Reduced Borrowing Costs: In subsequent years, if stablecoins follow traditional international currency patterns where 20-40-50% of money stays international, the country needs to borrow less for that free portion.
The financial projections show potential yield cost reductions:
- USD: From 4.13% today to 2.07% tomorrow and then 1.38% year 2
- Euro: From 2.2% today to 1.10% tomorrow then 0.9% year 2
Market Size Projections
Forecasts from Citi and BCG projecting the global stablecoin market could reach $1.6 to $2.4 trillion by 2030 in base case scenarios.
The U.S. currency supply in July 2025 totalled $2.40 trillion in September 2022. Estimates of 40 to 50% of that is held abroad. While the euro estimate is between 20% and 25% of the euro banknotes in circulation are held outside the euro area, mainly in
neighbouring countries.
Summary
Hong Kong Monetary Authority shows what is needed to manage the digital wallet and crypto currency world where customer ID is key. The five countries with ‘name brand’ currencies have a jump start but the race to capture the electronic position of international
physical cash is wide open.
