Morgan Stanley Reveals Hong Kong Bill: Can the Renminbi Stablecoin Challenge the Dollar Hegemony?

Question

Stablecoins serve as a bridge linking the encryption world and TradFi, having formed a market size of approximately 250 billion USD (99% pegged to the US dollar). The global regulatory framework is accelerating its implementation, with Hong Kong becoming an "offshore testing ground" for China's exploration of digital finance, thanks to the "Stablecoin Act" that took effect on August 1. Morgan Stanley recently released a report that delves into the core points of Hong Kong's "Stablecoin Act", its impact on the renminbi stablecoin, and the gradual changes in the financial and e-commerce sectors, revealing how Hong Kong is seizing the initiative in the stablecoin competition.

1. Global stablecoin legislation races, Hong Kong seizes the opportunity

Global Legislative Wave: The U.S. "GENIUS Act" (effective July 18), the EU "MiCA Act" (effective December 2024), Singapore (August 2023), Japan (June 2023), etc., have established regulatory frameworks focusing on core requirements such as reserve management and anti-money laundering compliance.

Hong Kong's strategic positioning: As China's offshore financial hub, the Hong Kong bill paves the way for the renminbi stablecoin (CNH), while balancing innovation and risk through stringent regulations (such as a 100% reserve requirement and a capital threshold of HKD 25 million), reinforcing its status as a global financial center.

2. Key Points of Hong Kong's Stablecoin Bill: Balancing Security and Innovation

Hong Kong's new regulations focus on "reserve stability" and "financial integrity," establishing a full-process standard for the issuance, trading, and custody of stablecoins, while also guiding their application towards the real economy.

Core requirements:

The issuer must hold a capital of not less than HKD 25 million or 1% of the nominal value of the issued tokens, and the reserve must be high liquidity assets (such as short-term government bonds), held in a separate account and disclosed in real time.

Mandatory KYC/AML (Anti-Money Laundering) procedures, regular audits, ensuring redeemability at any time (within reasonable cost limits).

Prioritize support for practical scenarios such as cross-border payments, supply chain finance, and retail transactions, rather than speculative trading.

Comparison with the US Act: Hong Kong has more flexible requirements for the qualifications of issuers (allowing foreign institutions), while the US limits it to bank subsidiaries or federally certified institutions; both require 100% reserves, but Hong Kong does not prohibit the re-pledging of reserve assets, which is explicitly prohibited in the US.

3. Renminbi Stablecoin (CNH): Potential and Challenges Coexist

Hong Kong provides a testing ground for the renminbi stablecoin, but constrained by offshore liquidity and policy restrictions, its development may lag behind the US dollar and Hong Kong dollar stablecoins.

Limiting factors:

The offshore RMB pool is only about 1 trillion yuan, far lower than the onshore 300 trillion yuan, and the supply of high-quality reserve assets (such as offshore central bank notes) is unstable.
The thin liquidity and weak network effects make it difficult to replace the dominant position of the US dollar stablecoin in cross-border payments.
The digital yuan (e-CNY) has received policy priority support, while the CNH stablecoin serves more as a supplementary tool.

Breakthrough path: If integrated with CIPS (Cross-border Interbank Payment System), expanding the issuance of offshore RMB bonds may accelerate the application of CNH stablecoin.

IV. Early Beneficiaries: Crypto Ecosystem, Fintech, and Exchanges

Hong Kong's new stablecoin policy will first benefit three types of institutions: issuers with mature blockchain technology, encryption trading platforms, and financial infrastructure relying on liquidity enhancement.

Futu Holdings (FUTU. US): Through its encryption platform (brokerage + exchange), it connects a large retail user base. If stablecoin is integrated with encryption trading, the potential income in 2027 could reach HKD 240 million (based on an estimated investment return of 2.5% on reserves).

ZhongAn Online (6060.HK): Indirectly holds a 8.7% stake in stablecoin sandbox participant RD InnoTech, its subsidiary ZA Bank provides reserve custody services for stablecoin issuers, and is the first digital bank in Hong Kong to support retail encryption trading.

Hong Kong Stock Exchange (0388. HK): Benefiting from the liquidity increase brought by stablecoins, it is expected that IPO financing will reach HKD 107 billion in 2025 (year-on-year + 700%), and stablecoins may further enhance trading efficiency (such as T+0 settlement).

5. The Impact on Finance and E-commerce: Gradual Change Rather than Disruption

Stablecoins have a limited impact on the TradFi model, but in the long term, they may reshape the efficiency of cross-border transactions; applications in the e-commerce sector need to overcome user habits and regulatory barriers.

TradFi: Stablecoins are positioned as "blockchain cash equivalents", do not generate interest, and cannot replace bank deposit services; however, they can reduce cross-border settlement costs (80% lower than SWIFT) and shorten time (from 3 days to minutes).

Cross-border e-commerce: Platforms like Alibaba and JD can reduce transaction costs through stablecoins (the founder of JD claims it could be reduced by 90%), but developed countries already have mature payment systems, and the motivation for users to switch is weak; emerging markets may become the breakthrough.

6. Risk Warning: Regulatory Uncertainty and Market Volatility

Stablecoins are still in the early stages of development and must be wary of three major risks:

Regulatory arbitrage: Inconsistent global frameworks may lead to capital flowing to looser regions, and the policy coordination between Hong Kong and the mainland needs to be continuously monitored.

Liquidity shock: Stablecoins can be quickly converted to cash, and during market turmoil, this may exacerbate sell-offs (such as when stablecoin issuers sell U.S. Treasuries or push yields up by 6-8 basis points).

Business Feasibility: The 100% reserve requirement compresses profit margins, which may restrict participation from small and medium-sized issuers.

Conclusion:

Hong Kong's new stablecoin policy is a key step for China to participate in global digital financial competition. In the short term, it benefits the encryption ecosystem and fintech companies, while in the long term, it may strengthen its position as a "linker of Chinese and American finance." However, the breakthrough of the renminbi stablecoin still depends on the improvement of offshore liquidity and policy coordination, and investors need to rationally consider the opportunities and risks.