The stablecoin market is迎来新一轮热潮

Recently, the stablecoin sector has once again attracted market attention. Reports suggest that a well-known technology company is planning to apply for stablecoin licenses in Hong Kong and Singapore. The company responded by stating that it is accelerating investments in global asset management and expanding collaborations, aiming to put its innovations in AI, blockchain, and stablecoins into large-scale application.

"We welcome the Hong Kong Legislative Council's passage of the 'Stablecoin Bill' and will submit our application as soon as the bill takes effect, hoping to contribute more to the construction of Hong Kong as a future international financial center," the company stated.

According to reports, senior executives of the company have revealed that they have initiated the application for a stablecoin license in Hong Kong and have already had multiple rounds of communication with regulatory authorities. This news has triggered a market response, with related concept stocks experiencing a collective increase.

What is a stablecoin? What is the development space for the Hong Kong dollar stablecoin? Why are financial institutions and technology companies rushing to get involved? What challenges does the industry face? Let's explore together.

1:1 asset backing ensures stability

For a long time, the price fluctuations of virtual assets have been controversial. Stablecoins, being pegged to specific assets, have relatively stable prices and are more likely to gain market trust.

According to the "Stablecoin Regulation" issued by the Hong Kong Special Administrative Region government, stablecoins need to reference a single asset or a group of assets to maintain stable value. Hong Kong has also clarified the concept of "designated stablecoins," which refer to stablecoins that maintain stable value by referencing official currencies, units of account specified by the Monetary Authority, or forms of storing economic value.

The most well-known stablecoin at present is USDT, which is pegged to the US dollar. The issuer claims that all USDT is pegged to the dollar at a 1:1 ratio and is supported by 100% reserves.

To ensure the true stability of stablecoins, multiple countries and regions have imposed strict requirements on their reserve assets. The regulations in Hong Kong clearly state that the market value of the reserve asset portfolio must always be no less than the face value of the circulating stablecoins, and it must consist of high-quality, highly liquid, low-risk assets.

The United States, the European Union, Singapore, and other regions have also proposed similar requirements for stablecoin reserve assets, usually including cash, short-term government bonds, and other highly liquid assets.

Industry experts indicate that the purpose of setting a 1:1 peg is to ensure that the stablecoin is backed by real assets, avoiding "hollow finance" or the risk of a run on the bank. Full reserve coverage is necessary to guarantee the stablecoin's "par redemption" promise, maintaining its circulation and settlement functions.

There is a view that the United States intends to link stablecoins to U.S. Treasury bonds in order to establish a "digital Bretton Woods system." Experts point out that this also means that issuers of U.S. dollar stablecoins will become major buyers of U.S. debt, which is beneficial to U.S. interests.

Finding application scenarios is key

The total global stablecoin market is currently around 230 billion USD, with USDT and USDC accounting for 63% and 25% of the market share, respectively. To get a piece of the pie in this field, Hong Kong is accelerating the relevant processes.

The Hong Kong Monetary Authority has launched a "sandbox" for stablecoin issuers, providing a testing environment for institutions intending to issue fiat stablecoins in Hong Kong. The Hong Kong Legislative Council has also passed the "Stablecoin Bill", which will take effect on August 1 of this year.

For Hong Kong, which hopes to become an international virtual asset center, developing stablecoin business is an important part. However, due to the obvious disadvantage in market share, the prospects for Hong Kong dollar stablecoin remain to be observed.

Experts believe that, apart from regulatory approval, finding application scenarios is key to the development of non-USD stablecoins. Currently, stablecoins are primarily used for cryptocurrency trading, but the relevant trading volume in Hong Kong is still relatively small. Therefore, in the short term, the HKD stablecoin may maintain a certain scale, but it will not be too large.

In the future, it can expand from virtual currency trading to areas such as cross-border payments. Hong Kong, as an important financial center and service trade hub, has a huge demand for cross-border payments. Stablecoins have advantages in shortening payment time and reducing costs.

Industry insiders say that stablecoins issued in Hong Kong must be aimed at cross-border scenarios, with limited value for local use. However, enabling cross-border transactions that connect on-chain and off-chain is a long-term project that requires joint efforts from all parties.

All parties actively layout stablecoin business

With the promising outlook of the stablecoin market, relevant institutions are speeding up their layouts.

In February this year, a certain bank, technology company, and telecommunications operator reached an agreement to establish a joint venture to apply for a license to issue a Hong Kong dollar pegged stablecoin.

It is worth noting that stablecoins have created a new financial incremental space. Recently, a certain cryptocurrency company went public on the New York Stock Exchange, becoming the "first stock of stablecoins," with a market capitalization exceeding 23 billion dollars.

Experts believe that, in addition to American companies, enterprises in China, Europe, South America, and other regions will also enter the stablecoin market, with promising prospects.

Large technology companies respond quickly, as mentioned earlier, a well-known company has taken action regarding stablecoin licenses. Analysis suggests that the company's move aims to strengthen its blockchain technology layout and further serve its cross-border payment and fund management business.

From a global competition perspective, this Chinese company positions itself as a competitor to international payment giants, all of which have ventured into stablecoin issuance. With strong capital management capabilities and a global financial technology background, the company has a first-mover advantage in the Hong Kong stablecoin market.

Participation in stablecoin issuance also involves considerations for asset allocation. Institutions can obtain fiat currency from stablecoin holders at a low cost and invest in low-risk assets to generate returns. The higher the issuance of stablecoins, the more significant the potential investment returns.

The industry still faces many challenges

Despite the promising outlook, the stablecoin industry still faces many challenges.

First is the issue of asset stability. Although a 100% collateralized reserve enhances security, it still cannot completely eliminate risks. If there are issues with the reserve assets, the stablecoin will also be affected. Last year, the collapse of a certain bank in the United States caused significant fluctuations in the price of USDC.

Secondly, there are compliance issues. In areas such as cross-border payments, although stablecoins have advantages in cost and efficiency, the strict linkage between issuance and reserves presents a significant challenge. Anti-money laundering is also a focus of regulation.

In addition, the high compliance costs are a challenge that industry participants must overcome.

Finally, for countries with non-mainstream currencies, the convenience of stablecoins may lead to a large sell-off of the national currency, posing challenges to financial sovereignty and security.

Overall, the stablecoin market presents both opportunities and challenges. As the regulatory framework gradually improves, the industry is expected to develop healthily within regulations, injecting new momentum into financial innovation.