Hong Kong trials stablecoin, boosting digital yuan globally

Hong Kong passed a stablecoin law on August 1, trialling HKD Stablecoin in Sandbox to link digital yuan, expanding its global influence and reducing the dollar's role.

The South China Morning Post reported that Hong Kong’s digital finance sector is trialling a stablecoin backed by the local currency, the Hong Kong dollar (HKD Stablecoin), following the implementation of new stablecoin legislation earlier this month.

The Hong Kong Legislative Council passed the stablecoin law, which took effect on August 1, making the city one of the first jurisdictions globally to establish a legally recognised regulatory framework for stablecoins.

Last year, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, launched a regulatory sandbox for stablecoin issuers. Participants include Standard Chartered Bank, Animoca Brands, Hong Kong Telecommunications, Jingdong Coinlink, and RD InnoTech.HKD stablecoin supports e-CNY internationalisation

Morgan Stanley noted that stablecoins pegged to local currencies like the HKD could help China’s central bank digital currency, the e-CNY, gain wider international acceptance.

The initiative also aligns with Beijing’s broader strategy to strengthen the yuan’s role on the global stage while reducing the dominance of the US dollar in international trade and investment.

Laura Wong, China equity analyst at Morgan Stanley, stated that, theoretically, the HKD stablecoin could act as a bridge between e-CNY and global digital assets. Foreign investors could convert the largest stablecoins, USDT and USDC, into the HKD stablecoin and then into e-CNY to invest in assets listed in Hong Kong or tokenised securities.“The HKD stablecoin allows capital to flow without impacting China’s capital control regulations. It also serves as a gateway for the yuan to extend its influence in global markets through external channels,” Wong added.

The stablecoin could improve capital circulation and facilitate cross-border investment in Hong Kong’s capital markets, particularly through tokenised securities and digital asset platforms.

Furthermore, integrating stablecoins with e-CNY and projects like mBridge, a multi-central bank digital currency platform, could offer a new alternative for transactions using blockchain technology, reducing reliance on traditional financial messaging systems like SWIFT. This shift could have significant implications for countries' "financial sovereignty."

(2025/08/20-00:00)