Stablecoins and the Reconstruction of Hong Kong as an International Financial Center

Abstract:

Financial market infrastructure is "financial plumbing". Hong Kong has built financial infrastructure twice in history - the linked exchange rate system and RTGS, which ultimately shaped Hong Kong's status as an international financial center, once mentioned on par with New York and London. Now the advent of digital finance based on stablecoins has provided a window for institutional and technological innovation. Stablecoins have become a standard feature of the infrastructure of international financial centers. Hong Kong should seize the opportunity to become a super financial center driven by the dual engines of the US dollar and the RMB.

Author: Lieutenant Colonel Li ¹, Li Yongfeng ²

Introduction

In May 2025, the global financial landscape ushered in an important turning point. The U.S. Senate and the Legislative Council of Hong Kong successively passed legislation on stablecoins, marking a key step for digital currency to move towards the mainstream financial system. These two legislative actions not only reflect the increasingly important position of stablecoins in the global financial system, but also reveal that the United States and Hong Kong are trying to shape the global digital financial landscape by regulating stablecoins.

 In addition to the United States and Hong Kong, other countries and regions have also accelerated the legislation or amendment of stablecoins, including the European Union, Singapore, Japan, South Korea, Australia, India, Taiwan, Russia, Thailand, Argentina, etc. A global currency competition around the future of digital finance has begun. After several twists and turns, the United States finally faced up to stablecoins and tried to lead this change again. Financial companies and technology giants in various countries have long been gearing up.

 Stablecoins are no longer just "coin speculation artifacts", but have become payment channels for the digital economy and bridges between on-chain assets and legal tender. Former Federal Reserve Chairman Ben Bernanke believes that financial market infrastructure is "financial plumbing" to support transactions, payments, clearing and settlement, and to achieve mutual connection and interaction between financial institutions.

We believe that since the 1970s and 1980s, Hong Kong has built financial infrastructure twice - the linked exchange rate system and RTGS, which ultimately shaped Hong Kong's status as an international financial center, once mentioned on par with New York and London. Now that digital finance based on stablecoins has arrived, it provides a window for institutional and technological innovation. Hong Kong should seize the opportunity to become a super financial center driven by the dual engines of the US dollar and the RMB.

Note 1: Lieutenant Colonel Wang is the director of financial research at Asia Weekly.

Note 2: Li Yongfeng is the founder of Jieshengjishi Company and a blockchain expert.

1. Paradigm shift of financial infrastructure

Stablecoin is a cryptocurrency that maintains stable value by pegging to legal currency, gold or other assets. Therefore, stablecoin reduces price volatility through the anchoring mechanism, combining the efficiency of blockchain with the stability of traditional assets. This design makes it a "safe haven" in the crypto market, which not only retains the convenience and decentralization advantages of cryptocurrency, but also avoids the risk of drastic fluctuations of mainstream cryptocurrencies such as Bitcoin.

Unlike digital assets with high volatility such as Bitcoin, stablecoins are widely used in cross-border payments, remittances and decentralized finance (DeFi) due to their stability. According to market data, the total market value of the global stablecoin market has approached US$250 billion, and the on-chain transaction volume in 2025 is expected to reach US$10 trillion, showing its core role in the digital economy.

When people talk about stablecoins, they often focus on their convenience as a payment tool - buying and selling assets in the crypto world, or making small cross-border transfers. In fact, the real challenge of stablecoins to the traditional financial system (TradFi) is not that it creates a new "money" or currency (stablecoins that are 1:1 tied to fiat assets are actually not issued), but that it brings a new and disruptive clearing system.

The current global financial trade system mainly relies on a network woven by bank accounts and SWIFT (Society for Worldwide Interbank Financial Telecommunication). Cross-border remittances send payment instructions through SWIFT, and funds jump between multiple correspondent banks. Each jump means time delay and cost accumulation. The core of this system is not efficiency, but hierarchical trust based on national sovereignty and bank credit. And at the top of this pyramid, there is no doubt that the US dollar and its clearing system CHIPS (Clearing House Interbank Payment System) are the US dollar and its clearing system.

Under this global payment system, when a transaction occurs, the information flow (such as SWIFT messages) and the capital flow are two independent tracks. The information flow promises that the funds will move, but the actual settlement of the capital flow depends on a trust chain composed of multiple intermediaries. The inefficiency and high cost of this architecture are obvious, but its most fatal weakness lies in its systemic fragility: any problem in any intermediate link may lead to transaction failure and generate huge counterparty risk.

Stablecoin fundamentally solves this problem, combining the two actions of "bookkeeping" and "settlement" into one. In blockchain-based transactions, the transfer of tokens itself is settlement. The information flow and capital flow are no longer separated, they are encapsulated in the same operation, and the transmission of information (transaction records on the chain) and the transfer of value (change of asset ownership) occur simultaneously, realizing atomic-level exchange, so it is called "Atomic Settlement". This means that value can flow around the world in near real time and peer-to-peer, just like information, without the need for approval and settlement through layers of intermediaries. It no longer requires a bank account as a prerequisite, and a digital wallet is the key to this new world.

Stablecoins subvert the four core pillars of the traditional financial system

• Instant settlement (T+0, significantly reducing working capital requirements)

• Extremely low transaction costs (especially compared to the SWIFT system)

• Global accessibility (all year round, only requires an Internet connection)

• Programmability (a currency driven by extended coding logic)

In the traditional financial system, the hegemony of the US dollar is inseparable from its role as the world's main clearing currency. Global trade, commodity pricing, and foreign exchange reserves are almost all denominated in US dollars. Any country that wants to participate in the global economy cannot bypass the US dollar's clearing channel. This gives the United States unparalleled economic influence and the ability to impose financial sanctions, the so-called "dollar hegemony."

However, the emergence of stablecoins provides the world with a "Plan B." Because its underlying technology is decentralized, any economy can theoretically issue stablecoins anchored to its own legal currency. If SWIFT and the banking system are the "national highways" and "provincial highways" of the financial world, then the stablecoin clearing system has laid countless "air routes" directly to the destination around the world. Without traffic lights and no fear of road closures, this provides the possibility of breaking the financial structure of the US dollar as the single world currency.

In order to cope with the risk of sanctions imposed by the United States and the European Union on Russia, the Bank of Russia has established the SPFS system (Russian Bank Financial Information System) to replace the SWIFT system. In addition, China has also launched the RMB cross-border payment system CIPS. These systems are as complex and inefficient as the US dollar cross-border payment and settlement system:

CIPS, the cross-border payment system for RMB

In the digital financial era, the competition is no longer about who can print more trustworthy banknotes, but who can take the lead in establishing an efficient, secure, and widely adopted digital currency clearing ecosystem. This is a competition to seize the "ecological niche" in the new financial era. If a country can successfully promote its own stablecoin, it will not only enhance the international influence of its own currency, but also become the rule maker of the new generation of digital financial infrastructure, attracting global capital, technology and talents.

In essence, the core of this competition has never changed. It is still the struggle for coinage rights that has lasted for hundreds of years. From shells to gold, from paper money to digital, the form of currency is changing, but the economic sovereignty and power behind it have never been lost.

Now, the technological revolution has opened Pandora's box, and geopolitical games have followed. The new global currency war has begun, but the battlefield has shifted from the physical world to the invisible blockchain.

Second, the "flywheel effect" and "scale effect" of stablecoins

The stablecoin clearing system also has the advantages of being programmable, traceable, and verifiable. It is not only faster and cheaper, but also more open in theory - its entry threshold is no longer a bank license, but the ability to access the network. Obviously, as a new infrastructure of new finance, the pioneers of stablecoins have a flywheel effect, and the stablecoins of large economies such as the US dollar and the euro are more likely to obtain scale effects.

2.1 Flywheel Effect

·       Flywheel Effect: Refers to a system or business model that requires tremendous effort to start up initially, but once it is running, each link will promote and reinforce each other, forming a positive cycle, allowing the entire system to continue to grow with higher and higher efficiency and lower and lower costs. Taking the United States and the US dollar stablecoin as an example, the start-up and acceleration process of its flywheel can be broken down into the following interrelated links:

Step 1: Start the flywheel - Clear regulatory framework

The US GENIUS Act clarifies the regulatory framework and eliminates legal gray areas. Issuers like Circle (USDC) and PayPal (PYUSD), as well as traditional financial giants like JPMorgan Chase and Goldman Sachs, can safely invest resources because they know what the rules are and that their business is legal. Users (whether individuals or institutions) no longer need to worry about issues such as issuers running away and opaque reserves. Because of the regulatory endorsement of the US government (such as requiring 1:1 high-quality liquid asset reserves, regular audits, etc.), the US dollar stablecoin has transformed from a "risky asset" to a "cash-like" reliable tool.

Step 2: Flywheel Acceleration - Adoption and Integration

Once there is trust and legitimacy, the flywheel begins to gain initial momentum. Individual users will be more willing to use US dollar stablecoins for payments, savings, and cross-border remittances because it is faster and cheaper than traditional bank wire transfers. Institutional users such as Wall Street funds, market makers, and companies will begin to adopt it on a large scale. They can use USD stablecoins for instant settlement (T+0 settlement), replacing traditional clearing systems and greatly improving capital efficiency. Next is ecosystem integration. Compliant USD stablecoins will become the "king of collateral" and "king of transaction medium" in the world of decentralized finance (DeFi). All mainstream lending protocols and decentralized exchanges (DEX) will be centered on it. Payment companies (Visa, Mastercard), technology giants (Apple, Google), and commercial banks will seamlessly integrate it into their payment systems and apps. Imagine using Apple Pay to pay USDC directly, and the experience is almost the same as using fiat currency.

Step 3: Self-reinforcing loop of the flywheel

This is the core part of the flywheel effect, where each link begins to drive each other and form a strong positive feedback. The more people and merchants accept USD stablecoins, the greater its value to new users. This will attract more users and merchants to join, forming a classic "network effect", making it difficult for stablecoins of other currencies to compete with it. Huge trading volume and adoption will create unparalleled liquidity. Whether in centralized exchanges or DeFi protocols, the US dollar stablecoin has the best trading pair depth and the lowest slippage. This will attract traders and capital from all over the world, further deepening its liquidity, forming a "liquidity black hole" and draining the liquidity of other competitors.

The world's smartest developers and entrepreneurs will build new applications (dApps), financial products and services around this most mainstream and trusted stablecoin standard. This will form a huge digital economic ecosystem based on the US dollar stablecoin. Once users and assets are locked in this ecosystem, the conversion cost will be very high. Traditionally, the influence of the US dollar has been mainly in international trade, foreign exchange reserves and the banking system. Now, through stablecoins, the influence of the US dollar will penetrate every corner of the digital world-from NFT transactions to the metaverse economy to micropayments between IoT devices.

According to regulatory requirements, for every $1 of stablecoin issued, the issuer needs to hold $1 in real reserves (usually cash and short-term US Treasury bonds). This means that the larger the scale of the US dollar stablecoin, the greater the demand for US Treasury bonds. This indirectly helps the US government to raise funds at a lower cost and strengthens the global financial system's dependence on US Treasury bonds. Therefore, for the US dollar, the world's reserve currency, once the stablecoin takes the lead, it can not only slow down the global trend of de-dollarization, but also provide support for the US dollar.

2.2 Scale Effect

·       Scale Effect: Also known as economies of scale, it refers to the phenomenon that as output (here, the issuance and circulation of stablecoins) increases, unit costs gradually decrease. In the field of stablecoins, this includes not only technical costs, but also trust costs, compliance costs, and network construction costs.

For a stablecoin issuer, the compliance cost of operating in a country with clear and unified federal laws (such as the United States) is much lower than operating in dozens of countries or regions with different rules. Once a compliance exemption system that meets US standards is established, it can serve a large number of users around the world. This "one-time compliance, global service" model itself is a huge scale effect. In a small-scale, unregulated environment, users need to spend a lot of time and energy to study whether a stablecoin is trustworthy. But when the US government sets standards for the entire industry, the cost of trust is socialized. Users can "blindly trust" any stablecoin with a US license, which greatly reduces the transaction cost of the entire society.

As the user scale expands, the unit cost of building and maintaining infrastructure such as blockchain networks, wallets, exchange interfaces, and APIs will drop sharply. The average cost of processing 100 million transactions is much lower than the average cost of processing 1,000 transactions. Scale brings deep liquidity. For institutions that need to conduct large transactions, this means lower market impact costs (slippage).

In a market with poor liquidity, a $10 million transaction may cause a large price fluctuation, but in a market with tens of billions of liquidity, this transaction will have almost no impact. This efficiency advantage is unmatched by small-scale stablecoins. When the US dollar stablecoin becomes the market leader by virtue of its scale, its technical standards, API interfaces, and compliance practices will become the de facto "global standards". If projects in other countries want to interact with this huge US dollar digital economy, they must be compatible with these standards. This gives the United States a strong voice in the formulation of future global digital financial rules. Just like the TCP/IP protocol of the Internet today, whoever first develops a widely adopted standard will have the initiative in subsequent development. This is an intangible but extremely powerful scale advantage.

2.3 First mover advantage

In summary, for a large economy like the United States, promoting compliant US dollar stablecoins is by no means as simple as "embracing financial innovation." Through the "flywheel effect", the United States can use its existing monetary credibility and regulatory capabilities as an initial impetus to start a self-reinforcing cycle. This cycle will continue to expand the application scenarios of the US dollar in the digital field, deepen the world's dependence on US dollar liquidity, and ultimately "copy and paste" the hegemony of the US dollar from the traditional financial system to the future digital financial world. Through the "scale effect", the United States can build a solid moat for the ecosystem of the US dollar stablecoin. By reducing compliance, technology and trust costs and establishing global standards, it makes the competition cost of latecomers (such as euro stablecoins and yen stablecoins) extremely high, making it difficult to shake its dominant position.

Therefore, this stablecoin legislative competition is essentially a battle for the leadership of the future digital currency world. Pioneers, especially those with a strong sovereign currency foundation, will gain huge and even insurmountable advantages through these two effects. This is why everyone felt that stablecoins were nothing after they were launched for many years, but after Trump began to develop stablecoins in his second term, countries and economies suddenly became nervous, because the development of US dollar stablecoins in the US regulatory system would give full play to the flywheel effect and scale effect, and it would be unstoppable.

In this war on the chain, there is not much time left for the euro and the renminbi.

Three, how stablecoins reshape international financial centers

Since ancient times, the rise of international financial centers has essentially become a "hub port" for global capital flows. Whether it is London, New York or Hong Kong, their core function is to gather, dispatch and increase the value of global capital by providing the most outstanding infrastructure - including legal systems, talent networks, and the most efficient transaction clearing systems. However, when value itself begins to be digitized, the standard for measuring whether a "hub port" is advanced or not must also evolve accordingly.

We believe that stablecoins and cryptocurrencies are becoming key variables in the evolution of international financial centers with their efficiency, trust and consensus on rules. It is not just a new asset, it also represents the cornerstone of the next generation of financial infrastructure and is the standard for financial centers in the digital financial era.

3.1 Trust and Credit

From Venice's state guarantee, to Amsterdam's corporate and securitized credit, to London's central bank+global currency credit, and finally to New York's hegemonic currency+strong supervision+deep market credit, we can clearly see that the evolution of financial centers is a history of upgrading the "trust" manufacturing mechanism.

And stablecoins have elevated "trust" to a new stage through institutional design and technical means. The traditional financial system mainly solves the risk problem of counterparties, while the stablecoin system uses blockchain technology to solve the risk of the transaction system itself.

On the other hand, compliant and reputable stablecoins build consensus and trust between new and old formats. For TradFi, stablecoins are the "official passport" for its assets to enter the digital world. When a dollar enters the blockchain through a compliant stablecoin (such as USDC), it has programmability and composability, and can participate in new financial activities such as DeFi lending and automated market making, greatly expanding the use and income possibilities of assets.

For DeFi/Web3, stablecoins are the "value anchor" that connects it to the real world. It introduces the credit of sovereign currencies, the most core asset in the traditional world, and provides a pricing benchmark and hedging tool for this emerging ecosystem. The future growth of a financial center depends on whether it can become the intersection of the old and new financial worlds. A financial center with a strong stablecoin ecosystem will become the gateway for global TradFi capital to enter Web3, and will also be the first choice for Web3 innovative projects to seek real-world liquidity.

3.2 Capital Efficiency

As mentioned earlier, the stablecoin clearing system can not only solve the problem of counterparty risk, but also has extremely high efficiency. JD.com founder Liu Qiangdong said that through the stablecoin license, the exchange between global companies can be realized, which can reduce the cost of global cross-border payments by 90%, and improve the efficiency to within 10 seconds.

Therefore, in order to maintain its basic positioning as an "efficient place", the financial center must embrace stablecoins and use the efficiency of stablecoins' "atomic settlement" to achieve seamless and real-time flow of funds between global markets to capture any fleeting opportunities.

3.3 Rulemaking

Ultimately, the competition among international financial centers is a competition for the right to make global financial rules. In the field of technology, whoever has the most widely adopted infrastructure defines the industry standard. Windows defines the operating system for personal computers, and TCP/IP defines the communication protocol for the Internet.

Former Federal Reserve Chairman Ben Bernanke once likened financial market infrastructure to "financial plumbing." Plumbing) is used to support transactions, payments, clearing and settlement. As a new infrastructure, stablecoins may undermine this pipeline if they are not regulated. However, its rapid development also brings regulatory challenges, such as systemic risks, consumer protection and illegal activities. For example, insufficient reserves may trigger a "bank run" effect and affect financial stability. Regulation can ensure that stablecoin issuers provide transparent reports and regular audits to protect user interests. The cross-border nature of stablecoins requires international regulatory coordination. The EU's MiCA Act and the UK's FCA framework have begun to take action, but the regulation of decentralized stablecoins needs to be further unified to avoid regulatory arbitrage. Therefore, how to develop in a compliant and healthy manner is the focus of attention of all countries.

Li Yongfeng explores the theory of legal personality of blockchain decentralized communities in "On the Legal Personality of Blockchain Decentralized Communities-Analysis Based on Corporate Community Theory", which provides important inspiration for stablecoin regulation. The theory of legal personality helps to clarify the responsible subject, especially in decentralized stablecoins, DAO can be regarded as a company and subject to corporate law supervision.

Li Yongfeng believes that blockchain decentralized communities (such as DAO) should be given independent legal personality based on the communitarian theory. These communities have collective interests and organizational structures, similar to traditional companies, and should be regarded as legal entities to participate in civil and commercial legal relations. Stablecoins, especially decentralized stablecoins (such as Dai), are often managed by DAOs or similar structures. If DAOs are regarded as legal entities, their responsible parties in the issuance and governance of stablecoins can be clarified, solving the problem of unclear responsibilities in decentralized systems. Therefore, decentralized communities should have clear governance mechanisms, which can be applied to stablecoins, requiring open decision-making processes and member rights; innovative legal frameworks are needed to adapt to blockchain technology, which is consistent with the need for stablecoin regulation, such as achieving transparency and compliance through smart contracts.

It can be seen that infrastructure is the standard, and this law is also applicable in the digital financial era. A stablecoin ecosystem dominated by a specific financial center, its technical standards, compliance formats (KYC/AML processes), and API interfaces will subtly become de facto global standards. For example, if the US dollar stablecoin regulated by New York dominates, then global digital asset project parties must comply with the rules of the New York Department of Financial Services (NYDFS) in order to access this largest liquidity pool.

By supporting and supervising the stablecoin ecosystem of its own country, a financial center is not only upgrading its "hardware", but also exporting its own "software" - that is, regulatory concepts and financial rules. This is a higher-dimensional competitiveness that enables financial centers to occupy the most core and advantageous position in the competition. From efficient clearing, new trust mechanisms, to leading future rules, stablecoins play an indispensable role in these three aspects. It is no longer a financial product that adds icing on the cake, but like electricity and the Internet, it is the core infrastructure that drives the operation of the next generation of financial centers.

From the perspective of linked exchange rate system, Hong Kong dollar is a stable currency of US dollar, but it is not realized by blockchain technology. The core mechanism of linked exchange rate is that Hong Kong's monetary base (cash in circulation and bank balances in HKMA) must be supported by 100% or more of foreign exchange reserves (mainly US dollars). If issuing banks (HSBC, Standard Chartered, Bank of China (Hong Kong)) want to issue more Hong Kong dollars, they must first pay the HKMA an equivalent amount of US dollars at a fixed rate of 7.80 Hong Kong dollars to 1 US dollar. Vice versa.

It is worth thinking about why the Hong Kong British authorities chose to link to the US dollar instead of the British pound? That is because the US dollar can provide the greatest trust basis for the Hong Kong dollar.

4.1 The credit of hard anchor US dollar

The linked exchange rate system means that the Hong Kong government cannot print money at will to make up for the fiscal deficit or stimulate the economy. Behind every Hong Kong dollar issued is a real US dollar reserve. This institutionally eliminates the possibility of hyperinflation. This almost "self-binding" monetary discipline sends an extremely strong signal to global capital: Hong Kong is a place that respects rules, keeps promises, and has rigid property rights protection. This reputation is priceless, especially in a region full of uncertainty.

4.2 Efficiency Improvement

Due to the stable exchange rate, companies and investors do not need to buy expensive financial derivatives (such as forwards and options) to hedge exchange rate risks, which directly reduces the cost of investing and trading in Hong Kong. In cross-border trade and financial transactions, if one party uses Hong Kong dollars and the other party uses US dollars, the settlement process becomes extremely simple because the exchange rate is almost fixed. This greatly improves the efficiency of clearing and settlement. When financial institutions conduct large-scale asset allocation and fund allocation, they do not need to reserve a large amount of capital buffer for exchange rate fluctuations, which improves capital efficiency. Investors can calculate the US dollar value of their Hong Kong dollar assets very accurately because they know that the exchange rate will only fluctuate within a very narrow range of 7.75-7.85. This certainty is the key to attracting long-term, large-scale capital. Therefore, the linked exchange rate system has become the "stabilizing force" for Hong Kong to attract international capital.

4.3 The first leap

Because the Hong Kong dollar is pegged to the US dollar, Hong Kong naturally becomes one of the most important US dollar trading and settlement centers in the Asian time zone. Banks and companies around the world can easily exchange Hong Kong dollars and US dollars in Hong Kong, with excellent liquidity and extremely small spreads.

V. National Important EquipmentRTGS

Although Hong Kong has become an international financial center in Asia-Pacific since the 1980s, compared with the old international financial centers London and New York, Hong Kong has not been an international financial center for a long time, and there are obvious gaps and deficiencies in the construction of the financial market system. New York and London are currently recognized as global international financial centers. These two major financial centers are unmatched by other cities in terms of market size, degree of perfection and influence on global capital.

In the second echelon are cities such as Hong Kong, Singapore, Tokyo, Frankfurt, Paris, Zurich, and Sydney, which play a financial role in their respective regions and are regional international financial centers. In addition, cities such as Shanghai, Toronto, Seoul, Madrid, Dublin, Kuala Lumpur, Mumbai in India, and Johannesburg in South Africa basically play a financial role in their own countries and are national or state financial centers.

5.1 Competition in the Asia-Pacific region is fierce

However, the booming financial market in Hong Kong in the 21st century represents the rise of a super economic power in the Asia-Pacific region, and from the perspective of financial globalization, the Asia-Pacific region is also in need of a global international financial center that can cooperate with New York and London. In addition, from the perspective of the requirements of financial globalization for the efficiency of capital circulation, there should be at least three global financial centers, located in North America, Europe and East Asia, so that the global financial system can operate 24 hours a day. Only by mastering real-time information and product pricing power can a true international financial center be established.

The financial time zone theory also believes that regional trading platforms should be established based on the human life cycle and habits in order to grasp the needs of local and product real-time information and pricing power in a more timely manner. At present, there are two global international financial centers in North America, New York (West Zone 5) and Europe, London (Zero Time Zone), while East Asia lacks a global center and can only be replaced by three regional centers, Tokyo (East Zone 9), Hong Kong (East Zone 8) and Singapore (East Zone 7). Among them, Singapore sets its standard time in East Zone 8 to facilitate economic exchanges with Malaysia and China, which means that Singapore time is the same as Hong Kong and Beijing, with no time difference. From the perspective of the development needs of global international financial centers, Singapore and Hong Kong are the two most advantageous competitors, and the international community has a dispute between "New York and Hong Kong" and "New York".

5.2 Why Hong Kong stands out

Lieutenant Colonel Li pointed out in "RTGS, the National Important Equipment - In-depth Revealing the Value of Hong Kong You Don't Know 2" that this is closely related to an important financial infrastructure before and after Hong Kong's return. The main part of this infrastructure is RTGS - Real Time Gross Settlement (also known as real-time gross settlement) system. This is also the core of Hong Kong's becoming an international financial center.

Relying on advanced electronic technology, the United States took the lead in launching a complete RTGS system. In order to improve the financial system, the Hong Kong Monetary Authority began to develop the RTGS system after its establishment in 1993, and finally launched the Hong Kong dollar RTGS on December 9, 1996, becoming the fourth region in the world to launch the RTGS system, second only to the United States, Switzerland and the United Kingdom, and the United Kingdom was launched only a few months earlier than Hong Kong.

More importantly, after the Hong Kong dollar RTGS, the HKMA launched the US dollar RTGS system in 2000, with HSBC as the clearing bank, realizing the world's first electronic foreign exchange transaction simultaneous settlement, ending the Hearst risk that plagued foreign exchange transactions.

Norman Chan said that since the launch of the RTGS system in Hong Kong on December 9, 1996, it has been advancing with the times, with its functions constantly strengthened and upgraded. "What is particularly rare is that it has been operating 100% normally and continuously, without any downtime." This has laid the foundation for the future development of payment and settlement of Hong Kong banks, and is an important cornerstone for Hong Kong to become Asia's leading international financial center.

5.3 Seizing the Asian Time Zone

As Hong Kong's US dollar RTGS system has been operating smoothly and effectively, it has been highly recognized by the financial community. After multiple certifications, the Malaysian authorities connected the Malaysian ringgit RTGS system (RENTAS system) with Hong Kong's US dollar RTGS system in November 2006, allowing Malaysian ringgit and US dollar foreign exchange transactions to be settled synchronously during business hours in Malaysia and Hong Kong, thereby eliminating settlement risks. In that year, Singapore's RTGS system MEPS was just launched. After Malaysia, the Indonesian rupiah RTGS system and the Thai RTGS system were successively connected to the Hong Kong dollar RTGS system. In addition, the Euro RTGS system was launched in 2003, with Standard Chartered Bank as the settlement bank. With the construction of the RMB offshore center, the HKMA launched the RMB RTGS system in 2007, with the Bank of China as the settlement bank.

This internationally advanced, reliable, secure and efficient RTGS system handles a large number of capital transactions within the Hong Kong banking system every day. The average daily RMB settlement alone exceeds 1 trillion yuan, which strongly supports Hong Kong as a global hub for offshore RMB business. According to statistics from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), about 70% of global RMB cross-border payments are processed through the Hong Kong payment system.

In other words, as the infrastructure of the global financial market, the US dollar settlement system of "New York, London and Hong Kong" has formed a stable pattern, jointly supporting the 24-hour operation of financial globalization. New York, London and Hong Kong are three pillars, not in a competitive relationship, but in a mutually dependent relationship. If any of the three has problems, the impact on global finance is unimaginable.

5.4 The United States is cautious

The importance of Hong Kong as a US dollar trading center has been reflected in the confrontation between China and the United States in the past two years. At that time, it was reported that the United States wanted to restrict Hong Kong banks from using US dollar settlements, and even kicked Hong Kong banks out of the SWIFT system. In response, Hong Kong Monetary Authority Chief Executive Paul Chan said that Hong Kong is the third largest US dollar settlement center, serving a large number of multinational institutions in the Asian time zone, and financial centers are interconnected. Once there is any shock in the Hong Kong market, the United States will definitely be affected, and it will also shake the confidence of other investors holding US dollars as foreign exchange reserves. The United States is naturally well aware of the importance of Hong Kong's dollar market and ultimately did not take any practical action. It can be seen that Hong Kong's financial infrastructure with RTGS as its core is not only China's "national treasure", but also an important part of the global financial market. In this sense, the financial infrastructure with RTGS system as its core since Hong Kong's return to China is equivalent to recreating Hong Kong's international financial center, thus forming a clear advantage over Singapore, and is also Hong Kong's trump card against Singapore in the competition for international financial centers. Coupled with institutional arrangements such as the offshore RMB center and mainland companies listing in Hong Kong, Hong Kong has upgraded from a regional international financial center to a global financial center. This international financial center in transition can be regarded as one of the most significant achievements of Hong Kong in the 25 years since its return to China. Of course, both Hong Kong and international financial professionals have a clear understanding of Hong Kong's actual status as a financial center. On the one hand, they believe that Hong Kong's current status as a financial center is not as high as that of New York and London. On the other hand, they believe that whether Hong Kong can achieve this key leap depends on the development in the next few years. For Hong Kong now, the top priority is to consolidate the advantageous position brought by financial infrastructure and common law, restore the confidence of all sectors of the market in Hong Kong as soon as possible, and retain financial institutions and talents. Singapore has also been strengthening its financial infrastructure, especially in recent years, focusing on the application of blockchain in the financial field, and has become the blockchain center of Asia. In the long run, Hong Kong also needs to innovate in the field of financial technology to maintain its competitiveness in the financial field. From the perspective of the development of Hong Kong's financial center, the construction of financial infrastructure is crucial.

Now that stablecoins as digital financial infrastructure have become a natural outcome, how can Hong Kong take advantage of this opportunity to achieve another leap forward as a financial center?

We believe that Hong Kong's opportunity lies in the "dual engine drive" - ​​the two powerful digital engines of "Hong Kong dollar stablecoin" and "RMB stablecoin".

The core of Hong Kong’s “dual-engine drive” is to allow the two digital engines, “Hong Kong dollar stablecoin” and “RMB stablecoin”, to play different but complementary strategic roles on Hong Kong’s unique platform.

6.1 Hong Kong dollar stablecoinHKDS

The Hong Kong dollar stablecoin, due to its linked exchange rate system with the US dollar, is essentially a programmable US dollar proxy (USD Proxy) regulated by Hong Kong and operating in the Asian time zone. Nevertheless, it is critical to financial trade in the region: A large number of traditional financial institutions (banks, funds, family offices) around the world want to enter the digital asset field, but they are troubled by compliance and trust issues. HKDS, endorsed by the Hong Kong Monetary Authority, is a reliable "onboarding" tool for them. They can use HKDS to purchase tokenized assets (such as bonds, real estate) and participate in compliant DeFi protocols without directly holding stablecoins such as USDC/USDT that have been controversial in compliance in other jurisdictions.

HKDSSince it will strengthen the US dollar system, what about the RMB? The top priority is that Hong Kong should launch a stablecoin based on offshore RMB as soon as possible. Correspondingly, the RMB should accelerate its internationalization and adapt to the trend of global financial digitalization as soon as possible.

Offshore RMB stablecoin is Hong Kong's most unique and subversive trump card in this competition. Its strategic value lies in creating a brand new track. One of the biggest obstacles to the internationalization of RMB is the efficiency and cost of cross-border payment and clearing. CNHS can bypass the traditional SWIFT/CIPS system and provide a nearly zero-cost, zero-time-difference payment and settlement network for the "Belt and Road" trade, commodity trading, cross-border e-commerce, etc. This is a "dimensionality reduction attack" on the existing system.

Hong Kong's realistic strategy is to launch RMB stablecoins as soon as possible after the launch of the Hong Kong dollar stablecoin, so that Hong Kong will become the only place in the world where "US dollar ↔ Hong Kong dollar stablecoin ↔ RMB stablecoin" can be legally, compliantly and on a large scale. It can be seen that for China, CNHS uses Hong Kong's unique advantage as the largest offshore RMB center to provide the most critical infrastructure for the globalization narrative of the RMB, and seizes an irreplaceable strategic high ground for Hong Kong in the new global financial landscape.

——Hong Kong will no longer be just a center for stocks or foreign exchange, but a global liquidity center for digital value**. Capital from the dollar world and capital from the RMB world will meet, collide and merge here, creating unprecedented financial products and opportunities.

——Based on this dual-currency stablecoin infrastructure, Hong Kong can attract high-quality assets from around the world (from real estate to private equity, from art to carbon credits) to come here for tokenized issuance. Issuers can freely choose to price in HKDS or CNHS to attract investors from different sources.

——Hong Kong will become a unique "regulatory sandbox" where two different financial philosophies and technical paths from the East and the West can be experimented and integrated. For example, the cross-border application test of e-CNY can be carried out entirely in the interaction between Hong Kong and CNHS.

Conclusion

This is not only Hong Kong's own transformation and upgrading, but it is also likely to provide a key balance point and intersection for the evolution of the global financial landscape in the next few decades. Whether or not we can seize this opportunity will determine Hong Kong's global status in the second half of the 21st century.

References:

Marvin Barth: Stablecoins Are a Monetary Revolution in the Making, 2025, Thematic Markets

Rashad Ahmed Inaki Aldasoro: Stablecoins and safe asset prices, May 2025, BIS

Zhao Xiaobin: A century of competition among global financial centers: factors that determine the success or failure of financial centers and the rise of Chinese financial centers, World Geography Research, June 2010

Shen Jianguang: Opportunities and challenges of stablecoins to the international status of the US dollar, June 2025, Chief Economist Forum

Wang Yang, Bai Liang, Zhang Xueyi: Stablecoins are a double-edged sword of US dollar hegemony, June 2025, FT Chinese

Liu Yu: Using compliant stablecoins to build a new generation of global payment network, 2024, Wanxiang Blockchain

Li Yongfeng: On the legal personality of blockchain decentralized communities - analysis based on corporate community theory, 2021, Master's thesis collection of Renmin University of China

Li Lieutenant Colonel Wu: The little-known value of Hong Kong 2 - New York or New York? 2022, Demonstration Finance