The new Hong Kong stablecoin regulatory framework, effective from August 1, provides a clear roadmap for investors. According to research from J.P. Morgan and Guosen Securities, stablecoin issuers, licensed virtual asset exchanges, and related financial technology service providers in Hong Kong are set to benefit directly. However, obtaining a license is highly competitive, short-term profitability is challenging, the market is still nascent, business models vary, and regulatory approval will ultimately determine the winners.
For investors tracking virtual asset developments in Hong Kong, the stablecoin regulations offer a structured outlook. Reports indicate a global market exceeding $230 billion is now opening to regulated participation from Hong Kong. This means issuers, licensed exchanges, and supporting service providers stand to gain.
J.P. Morgan emphasizes that despite market enthusiasm, access is restricted and immediate profits are unlikely:
Early-Stage Market Scale: Hong Kong's current cryptocurrency trading volume remains small compared to the U.S. and global markets. Investors should maintain realistic expectations about short-term growth potential.
Diverse Profit Models: Issuers form the ecosystem's foundation, directly earning returns from reserve assets; licensed exchanges (e.g., OSL) generate fees via trading and settlement services; reserve banks (e.g., ZA Bank) provide custody; technology and financial brokers offer trading systems, technical support, and compliance services.
Regulation Decides Winners: Entities securing stablecoin issuance licenses from the Hong Kong Monetary Authority (HKMA) and those holding existing Virtual Asset Trading Platform (VATP) licenses will be primary beneficiaries. Among equities, internet brokers with extensive retail client bases and VATP licensing arrangements hold advantages over traditional brokers.
Stablecoin Returns: The issuer business model is transparent and attractive. However, Hong Kong rules explicitly prohibit paying interest to stablecoin holders, meaning "hold-to-earn" strategies are not viable locally. Investment approaches must adapt accordingly.
With stablecoins emerging as a new investment frontier, which opportunities deserve attention? Previously compiled lists of stablecoin-related concept stocks offer a reference point for investors.
The Trillion-Dollar Arena: Stablecoin Market Overview and Giants
The stablecoin market has evolved into a massive, billion-dollar sector rather than a niche concept.
Data cited by Guosen Securities reveal dominance by a few major players. Tether's USDT exceeds $150 billion in circulation, while Circle's USDC surpasses $60 billion. Both are off-chain, fiat-backed stablecoins pegged 1:1 to the U.S. dollar, collectively commanding nearly 87% market share.
Per J.P. Morgan's report, global stablecoin market capitalization exceeded $230 billion by Q2 2025. The bank categorizes stablecoins into four types:
- Off-Chain (Fiat-Backed): Backed by real-world assets like dollars or U.S. Treasuries, issued 1:1. Examples include USDT and USDC. This is the mainstream segment and Hong Kong's regulatory focus.
- On-Chain (Crypto-Backed): Issued via smart contracts collateralized by cryptocurrencies like Bitcoin. Dai is a prime example.
- Commodity-Backed: Pegged to physical assets like gold, such as Tether Gold, which has actual gold reserves.
- Algorithmic: Rely on algorithms and arbitrage mechanisms to maintain peg stability. The former UST reached nearly $20 billion before collapsing, highlighting its high risk.
For investors, this signals that competition in Hong Kong will primarily revolve around the most robust and regulator-friendly off-chain stablecoins.
"Earning While Sleeping"? Core Profit Models for Stablecoin Issuers
The business model for stablecoin issuers is remarkably straightforward and attractive.
Guosen Securities' report dissects the revenue streams of Circle, issuer of the second-largest stablecoin USDC. Circle's income comes mainly from two sources, but is highly imbalanced.
The core is earnings from reserve assets. When users buy one USDC with one U.S. dollar, Circle holds that dollar in reserve. The report notes Circle invests over 80% of reserves in a short-term U.S. Treasury fund managed by BlackRock, with the remaining 10–20% held as cash at systemically important banks. The risk-free interest generated from these investments forms the profit core. Data shows reserve earnings accounted for 99% of Circle's total revenue in 2024.
The secondary source is payment and settlement fees from user conversions, but this contributes minimally.
This model essentially allows issuers to leverage large user reserves for low-risk investments, profiting from the spread. Profitability depends entirely on reserve size and short-term interest rates.
For companies seeking to invest in the stablecoin ecosystem, obtaining an issuance license to control substantial reserves is key to accessing this primary revenue stream.
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The Hong Kong License Competition: Who Benefits in the Ecosystem?
With Hong Kong's Stablecoin Ordinance taking effect on August 1, 2025, competition for licenses is intensifying. Reports from Guosen Securities and J.P. Morgan identify several key participants and potential beneficiaries.
First are the ecosystem founders—issuers. The HKMA launched a "stablecoin issuer sandbox" in 2024, with three groups (five institutions) initially shortlisted as top candidates for first licenses:
- A consortium of Standard Chartered, Ant Group, and HKT, planning to issue HKDG, a Hong Kong dollar stablecoin.
- JD CoinChain Technology, aiming to issue JD-HKD for cross-border payments and supply chain finance.
- RD InnoTech, collaborating with Cobo and LianLian International to issue HKDR for DeFi and cross-border payments. Additionally, Ant Group's Ant Digital Technologies and Ant International have declared intentions to apply.
Next are the distribution channels—virtual asset trading platforms. Licensed exchanges are central to stablecoin circulation and trading. Guosen Securities reports the Securities and Futures Commission (SFC) had issued 11 VATP licenses by June 25.
The report cites OSL Group, Hong Kong's first licensed platform, as an example. Its 2024 revenue breakdown illustrates the monetization path:
24.5% from SaaS and related services, 70.2% from digital asset trading. Fee structures vary: retail clients pay 0.2%–0.28%, while institutional clients pay 0.15%–0.225%.
Then there are the brokers and financial institutions facing both opportunity and challenge. J.P. Morgan notes traditional brokers have indirect profit models compared to issuers sharing reserve earnings or exchanges collecting fees, often requiring revenue sharing with exchanges. However, brokers like Futu with extensive retail networks and advanced technology platforms are better positioned. Futu already offers crypto asset trading (via HashKey) and is actively pursuing its own VATP license.
Lastly, essential "picks and shovels" providers—infrastructure supporters. Ecosystem operation relies on foundational services. Guosen Securities mentions reserve banks (e.g., ZA Bank providing custody for RD InnoTech), asset managers (e.g., BlackRock managing Circle's reserves), and technology providers offering KYC/AML, payment, and blockchain security services (e.g., Forms Syntron, Digital China). These players will benefit from industry合规化和 scaling.
In summary, Hong Kong's stablecoin合规化 offers a clear investment landscape. Identifying companies with first-mover advantages in licensing, technology, and client bases is crucial for capitalizing on this digital finance evolution.
Frequently Asked Questions
What are stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable value by pegging to reserve assets like fiat currencies or commodities. They combine the benefits of digital assets with price stability.
Why is Hong Kong regulating stablecoins?
Hong Kong aims to become a global virtual asset hub. Regulating stablecoins protects investors, ensures financial stability, and attracts合规 capital by providing legal clarity and reducing risks like fraud or collapse.
How can investors participate in Hong Kong's stablecoin market?
Investors can consider listed companies involved in issuance, trading, or infrastructure—such as licensed exchanges, tech providers, or brokers with VATP applications—while monitoring regulatory approvals and market trends.
What risks are associated with stablecoin investments?
Key risks include regulatory changes, reserve asset mismanagement, market adoption delays, and technological failures. Hong Kong's prohibition on interest payments also limits passive income strategies.
How do Hong Kong's rules differ from other regions?
Unlike some jurisdictions allowing interest-bearing stablecoins, Hong Kong bans interest payments to holders. Its focus is on full reserve backing and stringent licensing to ensure stability and consumer protection.
Which sectors might benefit indirectly?
Aside from direct players, sectors like cybersecurity, legal and compliance services, auditing, and financial software could see increased demand due to stricter regulatory requirements and ecosystem growth.