Payment Industry Veteran Optimistic About Stablecoin Prospects

In 2011, a payment industry practitioner purchased his first Bitcoin, wanting to understand this unanchored cryptocurrency with a curious mindset. Over a decade later, he led a team to research stablecoins, with the goal no longer being to buy, but to issue.

Recently, an industry insider who is the current CEO of a certain technology company gave an exclusive interview to a well-known business weekly. He emphasized that stablecoins are different from cryptocurrencies like Bitcoin and Ethereum, and are more similar to mobile payments, essentially being a "payment tool." As a seasoned professional in the payment field, he has been deeply involved in the design and promotion of a well-known mobile payment product, and later took charge of payment business in several large enterprises.

He stated that he felt an atmosphere similar to that of the eve of the rise of mobile payments. In his view, payment stablecoins will become the new financial infrastructure of the Web3 era, playing a "disruptive" positive role in areas such as international trade.

Stablecoins are moving from the crypto world to a broader traditional financial system, thanks to advantages such as decentralization, low transfer costs, and transaction transparency and traceability. In May of this year, Hong Kong officially published the "Stablecoin Ordinance," marking the regulation of stablecoin activities related to Hong Kong and the Hong Kong dollar through a licensing system. As early as December last year, Hong Kong announced the implementation of a licensing system for fiat stablecoin issuers. In July of this year, three institutions, including the company, entered the sandbox for stablecoin issuers launched by the Monetary Authority for related testing.

The CEO revealed that their scenario testing in the sandbox is progressing smoothly, and they plan to launch stablecoins pegged to the Hong Kong dollar and other coins.

Although the company has not been established in Hong Kong for long, he believes that one of the company's first-mover advantages is having a "cold start" scenario from zero to one, namely a certain e-commerce ecosystem. He mentioned that if a compliant stablecoin could be issued, a large number of merchants on the platform could use the stablecoin for upstream and downstream settlements to improve efficiency and manage funds more flexibly overseas.

In a market where the two major US dollar stablecoins, USDT and USDC, account for over 80%, licensed issuers in Hong Kong must find other attractions, including use cases, in addition to the "compliance" advantage of their issued stablecoins. Among them, cross-border payments are undoubtedly a key area of competition for many stablecoin issuers. Meanwhile, retail payments also have positive significance in improving the market penetration and brand building of stablecoins.

Starting from August 1, the "Stablecoin Regulation" will officially take effect. Globally, regions such as Singapore, the European Union, and the United States have successively included payment-based stablecoins under regulation, making this existing stablecoin market, which is approximately $250 billion, increasingly hot.

In the future, will compliant stablecoins drive a paradigm shift in payments, further evolving from "offline to online" mobile payments to "online to on-chain"? Can Hong Kong leverage stablecoins to consolidate and enhance its key position in international trade? In an era where multiple currency-pegged stablecoins coexist, how will the global payment and financial systems change? These questions are worth our continued attention.

Current Status and Outlook of Stablecoin Development

Test Progress and Release Plan

As of early June, the company mainly conducted tests on the Hong Kong dollar stablecoin and plans to test other fiat stablecoins later. Based on market demand, it is expected that the two stablecoins will be issued simultaneously. The second phase of testing focuses on the application of stablecoins in three practical scenarios: cross-border payments, investment transactions, and retail payments.

In terms of cross-border payments, the plan is to expand the user base through direct customer acquisition and non-direct customer acquisition (such as cooperation with compliant wholesalers). In terms of investment transactions, discussions are underway with global compliant exchanges to launch stablecoins in different regions. In retail, a certain global e-commerce platform's Hong Kong and Macau site will be the first to implement stablecoin shopping features.

The company expects to obtain a license at the beginning of the fourth quarter this year and simultaneously launch a stablecoin. The stablecoin will be issued on a public chain, and at that time, anyone will be able to publicly access data such as the issuance volume.

Competitive Advantages of Compliant Stablecoins

In the field of cross-border payments, compliance is the core competitiveness. As regulations are implemented and business progresses, the market's understanding of this will gradually mature. The newly issued compliant stablecoin aims to open up new "battlefields", specifically connecting the traditional cross-border trade settlement market. This market has a large number of physical enterprises, cross-border trade participants, payment technology companies, etc., who need safe and compliant, transparent and auditable stablecoin services.

It is expected that international trade in regions such as Asia-Pacific, the Middle East, Africa, South America, and Europe will be the first to use stablecoins issued in Hong Kong for payment settlement.

The Similarities and Differences Between Stablecoins and Traditional Payments

Stablecoins are similar to mobile payments; they are essentially payment tools aimed at reducing costs and increasing efficiency through advanced technology and business models, enhancing user experience, and promoting inclusive financial development. On the technical level, stablecoins are based on a decentralized technological architecture; on the product structure level, stablecoins have an additional issuance system compared to traditional payment products.

The regulation of stablecoins is relatively complex and requires global compliance coordination. From a B2B perspective, large transactions may be the first to adopt stablecoins, especially in cross-border payment scenarios where friction costs are high, exchange rate fluctuations are significant, and time is lengthy. From a B2C perspective, it is necessary to have a phenomenal product and application, like the red envelope feature of a well-known mobile payment platform, to stimulate user motivation.

Outlook on the Hong Kong Stablecoin Industry Ecosystem

The key is to establish a risk-based, pragmatic, and flexible open ecosystem in accordance with the requirements of the "Stablecoin Regulations," where regulators, issuers, wholesalers, scenario providers, users, and investors need to cooperate with each other. It is necessary to grasp the breakthrough of capital settlement, leveraging Hong Kong's role as an international financial and trade center to expand the circulation and usage of stablecoins issued in Hong Kong across multiple regions, further transforming Hong Kong into an international stablecoin settlement hub.

The issuance of offshore RMB stablecoins is not much different from that of HKD stablecoins on a technical level, and potential application scenarios are already in place. However, in addition to commercial logic, comprehensive considerations must also be made from the perspectives of legal compliance and other aspects; ultimately, whether it can be implemented still depends on the regulations in the mainland.