Author: Sleepy.md

In July 2024, the Hong Kong Monetary Authority announced the list of three participants in the stablecoin sandbox.

One of the three families is called Yuanbi Technology, and its founder is Chen Delin. This name is well-known in Hong Kong's financial circles. He served as the president of the Hong Kong Monetary Authority for a full ten years and personally created Hong Kong's financial regulatory framework today. After retiring, he started a business, and with $40 million in financing, he entered the sandbox he designed himself.

Two years later, in April 2026, the first batch of stablecoin licenses were announced. Chen Delin lost the election. In April this year, the launch of Hong Kong’s stablecoin license was packaged as a milestone in financial innovation. But if you peel back the glossy narrative about “embracing Web3,” you’ll see a completely different story.

With this license, Hong Kong reveals its plight at the turn of the old and new eras. This city was once perfectly shaped by its history, and now it is trapped by this heavy history.

The competition for Hong Kong’s stablecoin license is more like an “arranged marriage” that is destined to end from the beginning. A total of 36 institutions have submitted applications for stablecoin licenses, and the queue is very long. There are technology giants, established brokers, and Web3 native upstarts with real money. However, only two licenses were ultimately issued, and the approval rate was only 5.5%.

On the list of losers, in addition to former Hong Kong Monetary Authority President Chen Delin's Yuanbi Technology, former sandbox participant JD Coin Chain, and Hong Kong's largest licensed virtual asset exchange OSL are among them. Those institutions with strategic will and hot money that tried to expand their territory in the digital currency wave were eventually wiped out.

So, who got the ticket?

One is HSBC. This long-established institution, which has been issuing banknotes in Hong Kong for 160 years, plans to launch a Hong Kong dollar stablecoin in the second half of 2026 and integrate it into PayMe and mobile banking apps. The way it enters the Web3 world is to put new things safely into the old bottles that it is most familiar with.

The other one is Dingdian Financial Technology. This is a company that was cobbled together to obtain a license, with Standard Chartered Bank holding 50.5%, Animoca Brands 37.5%, and Hong Kong Telecom 12%. Standard Chartered needs compliance endorsement, Telecom focuses on payment scenarios, and Animoca desires on-chain channels. None of the three parties was sure that they could crack this hard nut alone, so they chose to huddle together for warmth.

These two approved institutions are without exception old aristocrats in the traditional financial system, and they are both note-issuing banks.

Why did Hong Kong's regulators issue this license, which represents the future financial infrastructure, to the people who seem to need it least? Why do passionate entrepreneurs lose out?

The answer may be very realistic. In the eyes of regulators, stablecoins have never been a business, but an infrastructure. As for infrastructure, it is destined to be entrusted only to those who know the most about it.

Limited benefits, unlimited risks

The regulatory threshold for Hong Kong’s stablecoin license is so high that only note-issuing banks can meet the requirements. But when they actually sit at the poker table, people will discover that this is actually an almost unprofitable business.

According to the requirements of Hong Kong's Stablecoin Ordinance, issuers are required to maintain 100% high-quality asset reserves. This means that for every 100 yuan of stablecoins issued, there must be 100 yuan of cash or short-term government bonds sitting safely in the bank.

This money cannot be used for lending or chasing high returns. At the same time, the issuer also has to bear a minimum paid-in capital of HK$25 million, operate cautiously under strict bank-level anti-money laundering standards, and promises to respond to users’ redemption requests within one working day.

We can compare virtual banks in Hong Kong. There are currently 8 fully licensed virtual banks in Hong Kong. They can make high-interest loans and securities investments. However, since their opening in 2020, none of these 8 banks has made a profit. The total loss in 2024 has reached billions of Hong Kong dollars. None of them has made a profit since its opening.

Virtual banks with full licenses are still struggling with losses, and stablecoin issuers who can only buy short-term treasury bonds and rely on meager interest to survive can imagine their plight. They have unlimited responsibility for maintaining the stability of the currency value, and they also have to silently swallow high compliance and technical infrastructure costs.

After all, this is actually a business with limited returns and unlimited risks.

In this game, it is difficult to say that Standard Chartered and HSBC are the real winners. They can be understood as being forced to the poker table. If HSBC does not apply, it will be equivalent to handing over the underlying track of the digital Hong Kong dollar to Standard Chartered; if Standard Chartered does not apply, it will be equivalent to admitting that it is absent from the future map of Hong Kong's financial system.

Through high compliance thresholds and hidden rules, the Hong Kong government has firmly locked the two note-issuing banks at the poker table. Through this exquisite set of rules, regulators have allowed giants to "voluntarily" bear the huge cost of building digital currency infrastructure.

Anyone familiar with this city knows that this is actually the consistent behavior of Hong Kong regulators.

But where does this regulatory gene that is extremely risk-averse and would rather lock innovation in an iron cage come from?

Post-traumatic syndrome

Hong Kong's extreme conservatism towards stablecoins has been criticized by the outside world as stifling innovation. But if you look at the financial history of Hong Kong, you will find that this conservatism is not because the current regulators are timid, but because the city has a muscle memory shaped by bloody lessons in several life and death situations.

Behind every stringent regulatory provision, there is actually a real crisis.

The first crisis was in 1983.

That year, Sino-British negotiations were in a stalemate. The extreme political uncertainty has directly triggered a crisis of confidence in the Hong Kong dollar. Citizens frantically sold Hong Kong dollars to buy U.S. dollars. The Hong Kong dollar exchange rate plummeted from about HK$1 to HK$5 to HK$9.6 in just a few days. Supermarkets were sold out of toilet paper and cans, and panic spread throughout Hong Kong.

During that stormy weekend, the British Hong Kong government urgently launched the linked exchange rate system and announced that the Hong Kong dollar would be "pegged" at HK$7.8 per US dollar. For every HK$7.8 issued by the note-issuing bank, it must pay US$1 to the Exchange Fund. They are trying to use their absolute dollar reserves to exchange for absolute public confidence.

This decision, made hastily during the crisis, has been in operation for 43 years without any loosening. It is the unshakable anchor of Hong Kong’s monetary and financial system, but it has also become the source of conservatism in the city.

The second crisis was in 1997.

The Asian financial crisis is approaching, and international speculators led by Soros have brought huge sums of money to attack the Hong Kong dollar three times. They used the linkage between the foreign exchange market, the stock market and the futures market to try to overthrow the linked exchange rate system. In that fierce fight without gunpowder, the Hong Kong government used HK$118 billion of the Exchange Fund to protect the market. At one point, it bought 7% of the market value of Hong Kong stocks before repelling the short sellers.

This is a tragic victory achieved with real money. The price it left to the city was that regulators became extremely sensitive to systemic risks and liquidity depletion.

The third crisis was in 2008.

That year, the bankruptcy of Lehman Brothers triggered a global financial tsunami. In Hong Kong, more than 44,000 citizens lost their money by purchasing Lehman-related products, with the amount involved reaching HK$20.1 billion. Countless gray-haired old people gathered in front of the bank and cried, and the protests continued on the streets for months.

This incident has left a scar that will be difficult to heal on Hong Kong society. It not only directly gave birth to Hong Kong's strict regulatory system for retail financial products, but also planted deep wariness and distrust in the hearts of an entire generation of Hong Kong people towards complex financial derivatives.

After staring at these three historical wounds, you may be able to understand why the Hong Kong Monetary Authority will not hesitate to impose "100% high-quality asset reserves", the world's most stringent requirement, when faced with stablecoins.

In the eyes of regulators, no matter how avant-garde technology they are dressed in, the underlying nature of stablecoins is, after all, a kind of private banknotes stripped of national credit endorsement.

Once there is a hole of even 1% in the reserve assets of stablecoins, who will be the one to cover it once a run occurs? Will ordinary taxpayers have to swallow a bitter pill, or will the government once again use foreign exchange reserves to fill the black hole?

Faced with stablecoins, Hong Kong's first instinct has never been to embrace innovation, but to "never let the crash happen again." This obsession with absolute safety is more like a long collective post-traumatic stress reaction, which eventually turned into ink marks of restraint and was engraved word by word into legal provisions.

But when a city pursues "safety" to the extreme, what price does it have to pay?

A city trapped by extreme success

Hong Kong's difficulties are not caused by its backwardness, but precisely because it was too advanced. This city is accustomed to achieving the ultimate in a certain era, and then being quietly trapped by this extreme success, and finally passing by the next era.

The most typical example is the Octopus.

In 1997, Octopus was launched in Hong Kong. It is one of the earliest and most successful contactless electronic payment systems in the world, and was once studied by major cities around the world. As long as you hold this small card, you can take the subway, take buses, buy newspapers, and eat fast food in Hong Kong almost without any obstruction.

But precisely because Octopus is so successful, so popular, and so easy to use, Hong Kong merchants and consumers have no incentive to switch to new payment methods. While Alipay and WeChat Pay are sweeping everything in the Mainland and using QR codes to reshape the business model of the entire society, people are still habitually swiping their Octopus cards in subway stations and convenience stores in Hong Kong.

The success of Octopus has made Hong Kong ten years late in the mobile payment wave.

Now, in the face of the wave of stablecoins and Web3, Hong Kong is repeating the Octopus playbook. Only this time, it is the traditional financial system that it is proud of.

Hong Kong has the world's most complete traditional financial legal system, the most mature banknote-issuing bank system, and the most stable and tested linked exchange rate. These things, in the traditional financial era, are Hong Kong's unparalleled moats. But in the world of Web3, they have become the heaviest baggage.

Hong Kong is trying to embrace a new thing that aims to subvert the traditional financial structure without changing the underlying financial structure. Its answer is to shoehorn Web3 into the framework of traditional banks, and then announce to the world that this is "innovation."

This is not only arrogance for innovation, but also an extreme fear of losing control. This city is so afraid of making mistakes that it would rather maintain an impeccable and perfect posture and watch an era whiz by than impact the future with some rough flaws.

Two tracks, one city

Hong Kong is undergoing a "dual-track" financial experiment.

Let us shift our focus from stablecoin licenses to the 400 Circle K convenience stores in Hong Kong.

In October 2025, a new option will be quietly added to the checkout counters of these convenience stores: support for digital renminbi (e-CNY) payment. Along with this, the Hong Kong Monetary Authority’s “FPS” system and the digital RMB system have completed the world’s first low-level two-way interoperability of legal digital currencies.

The main force driving all this behind the scenes is Bank of China Hong Kong.

Now, look back at the application list for the stablecoin license. There are three major note-issuing banks in Hong Kong: HSBC, Standard Chartered, and BOC Hong Kong. The first two companies have obtained licenses, but BOC Hong Kong is absent.

The absence of Bank of China Hong Kong reveals that Hong Kong's financial base is being split into two parallel tracks. And these two tracks are each extending to two completely different futures.

A track leading to a view to the west. Hong Kong is trying to use an extremely compliant Hong Kong dollar stable currency license to send a signal to international capital. It is still an international financial center with transparent rules and strict supervision. In the cryptocurrency landscape dominated by the US dollar, Hong Kong still has the ability to cut its own piece of cake.

The other track is connected to the pulse of the mainland. The digital renminbi has taken root on the streets of Hong Kong, carrying the national strategy of internationalizing the renminbi and reshaping cross-border payment and settlement. In this grand picture of the times, Hong Kong must firmly accept this important trust and continue to play the role of the irreplaceable "super connector".

Those Chinese institutions that quietly exited the market before the application deadline for stablecoin licenses have actually long understood how far these two tracks extend.

In October 2025, according to the Financial Times, Ant Group and JD.com suspended their stablecoin plans in Hong Kong after receiving instructions from the People's Bank of China and the Cyberspace Administration of China to "not advance the project for the time being." The boots were implemented in February of the following year. The central bank jointly issued a notice with eight departments, clarifying for the first time in the form of a normative document that no unit or individual is allowed to issue stable currencies linked to the RMB overseas; domestic entities and the overseas entities they control are not allowed to issue virtual currencies overseas without approval.

Faced with this clear red line, Hong Kong dollar stablecoins have inherently locked liquidity.

It cannot go north. The mainland has clearly defined virtual currencies as illegal financial activities, and Hong Kong dollar stable coins will never become a channel for mainland funds to go overseas.

It is also difficult to move westward. Looking across the ocean, USDT and USDC already account for more than 85% of the world’s stablecoins. With the gradual advancement of the US "GENIUS Act", the moat of the US dollar stable currency has long been built high. The fledgling Hong Kong dollar stable currency has almost no chips to compete head-on with the US dollar in international waters.

Hong Kong is caught in the middle of the financial game between the two largest economies in the world, trying to use an extremely conservative compliance posture to maneuver in the tight gap. It must not only maintain the appearance of the Western financial order, but also undertake the important task of national strategy.

This is no longer just a dilemma for a stable currency license, it is also the anxiety of the times that Hong Kong, as a "super contact", has to face in the winter of anti-globalization.

How long can a city run on two opposite tracks at the same time?

Lost Brother Ma

Hong Kong is not unaware of its situation. Every time it was conservative, every time it defended, there was a bone-deep obsession surging in the background: I can't lose it anymore.

At least on the surface, the lights of Victoria Harbor are still bright. In the latest Global Financial Center Index in March 2026, Hong Kong firmly ranks third in the world, and ranks first in the banking and financing fields. There is no doubt that it is still the shining top financial center in the world.

But at the same time, another set of data is telling a very different story.

In 2025, Hong Kong's Grade A office vacancy rate climbed to 17.5%, a record high. The vacant office space in Hong Kong is equivalent to 13 International Financial Center Phase 2 buildings. Foreign financial institutions continue to lay off employees and shrink. APG, the largest pension fund in the Netherlands, and many European and American law firms have successively reduced their business scale in Hong Kong.

By the first quarter of 2026, the Hang Seng Technology Index fell 15.7%, ranking last among the world's major stock indexes. Foreign capital continues to withdraw from the technology sector of Hong Kong stocks, and southbound funds have become the only supporting force.

Even if it is the report card that Hong Kong is proud of, "the IPO funds raised by the Hong Kong Stock Exchange in 2025 will reach 285.8 billion Hong Kong dollars, regaining the world's first place", after careful dismantling, it will be found that nearly half of the 285.8 billion Hong Kong dollars came from A-share companies listing in Hong Kong. This is not so much that global capital is pouring into Hong Kong enthusiastically, but rather that mainland enterprises are desperately looking for a respite overseas financing outlet.

Hong Kong wants to prove itself too much. It really wants to tell the world that it is still the irreplaceable financial center.

In 1986, John Woo filmed "A Better Tomorrow." Ma Ge, played by Chow Yun-fat, said in the film:

"I have been waiting for three years, just for an opportunity. I want to fight for it. I don't want to prove that I am great. I want to tell others that I must get back what I have lost."

It was 1986, the Sino-British negotiations had just concluded, and the whole city was filled with anxiety about the future and an extreme desire for dignity. These words of Brother Ma are like a sharp knife, accurately hitting the deepest emotions of that generation of Hong Kong people.

Forty years later, Hong Kong is still waiting, waiting for an opportunity, waiting for a stage that allows it to prove itself again.

Only this time, faced with the opportunity of Web3 and digital currency that may reshape the global financial landscape, it chose to seize it in the most conservative, safest, and least error-prone way. It personally locks the sharpest innovations into the strongest iron cage.

The Hong Kong that was once full of wildness, dared to dance on the edge of the cliff, and wanted to get back what it lost at all costs, has gone.