How will Hong Kong's stablecoin be played?

For investors who are interested in the development of virtual assets in Hong Kong, the stablecoin new regulatory framework that came into effect on August 1st provides a clear industry landscape for investors. According to news from the Wind Trading platform this week, Morgan Stanley and Guosen both released research reports, pointing out that a global market with a size exceeding $230 billion is entering compliance in Hong Kong. For investors, this means that stablecoin issuers in Hong Kong, licensed virtual asset exchanges, as well as related financial and technology service providers will be direct beneficiaries. However, Morgan Stanley emphasized that despite the market enthusiasm, not everyone can enter the Hong Kong market, and profiting in the short term is not easy either: Early-stage market size: Hong Kong's current cryptocurrency market trading volume is still very small compared to the US and the global market. Investors should have a rational view of its short-term growth potential and avoid overly high expectations. Diversified profit models: Issuers are the starting point of the ecosystem, directly sharing the income from reserve assets; licensed exchanges (such as OSL) earn fees by providing trading and clearing services; reserve banks (such as Zhongan Bank) provide custody services; technology/financial brokers (such as Futu, Shenzhen Forms Syntron Information) provide trading systems, technical support, and compliance services. Regulatory decisions determine winners: Those who can obtain a stablecoin issuance license from the Hong Kong Monetary Authority (HKMA), as well as exchanges that already hold VATP licenses, will be the main beneficiaries of this game. For individual stocks, internet brokers (such as Futu) with a large retail client base and VATP licenses have an advantage over traditional brokers. Stablecoin revenue: The business model of stablecoin issuers is extremely clear and attractive. However, Hong Kong regulations clearly prohibit paying interest to stablecoin holders, which means that the "interest-bearing holding" model is not feasible in Hong Kong, and investment strategies need to be adjusted accordingly. A trillion-dollar poker table: The current situation of the stablecoin market and giants The stablecoin market is no longer a niche concept but a huge market at the trillion-dollar level. Data cited by Guosen shows that the market is dominated by a few giants. The size of USDT issued by Tether exceeds $150 billion, while the size of USDC issued by Circle exceeds $60 billion, both of which are off-chain stablecoins anchored at a 1:1 ratio to the US dollar, accounting for nearly 87% of the market share. According to Morgan Stanley's report, as of the second quarter of 2025, the total market value of stablecoins globally has exceeded $230 billion. Morgan Stanley classifies stablecoins into four categories: Off-chain (fiat-based): Issued 1:1 based on real-world assets (such as dollars, US bonds), such as USDT, USDC. This is the mainstream in the current market and the core target of Hong Kong regulation. On-chain: Issued based on blockchain smart contracts collateralized by encrypted assets (such as Bitcoin), such as Dai. Commodity-backed stablecoins: For example, Tether Gold linked to gold, with actual gold assets backing it. Algorithmic: Stablecoin value stabilized by algorithms and market arbitrage mechanisms, such as the former UST, which reached a peak close to $20 billion before being liquidated, highlighting its high risk. For investors, this means that future competition in the Hong Kong market will mainly revolve around the most stable and regulator-friendly "off-chain" stablecoins. "Lying down to make money"? The core profit model of stablecoin issuers The business model of stablecoin issuers is extremely clear and attractive. Guosen's report uses Circle, the issuer of the second-largest stablecoin USDC globally, as an example, detailing its sources of income. Circle's revenue mainly comes from two main areas, but the balance between the two is extremely uneven. Its core is income from reserve assets. When a user buys 1 USDC with $1, Circle reserves that $1. The report points out that Circle invests over 80% of its reserves in short-term US Treasury funds managed by BlackRock, with the remaining 10-20% in cash held in globally systemic importance banks. The interest income generated from these investments constitutes the core profit of Circle. The data shows that in 2024, this portion of the reserve asset income accounted for 99% of Circle's total income. Another source of income is payment and clearing fees, namely the fees generated when users exchange stablecoins, but this portion of income is relatively small. The essence of this model is that the issuer uses a large amount of user reserve funds for low-risk investment and profits from the interest spread. Its profitability depends entirely on the size of the reserve funds and the level of short-term interest rates. For companies seeking to invest in the stablecoin ecosystem, the ability to obtain an issuance license to control large reserve funds is crucial to whether they can share the largest piece of the pie. The battle for licenses in Hong Kong: Who are the beneficiaries in the ecosystem? With the formal implementation of the Hong Kong "Stablecoin Regulations" on August 1st, 2025, a battle for licenses has already begun. The reports from Guosen and Morgan Stanley collectively point out several key participants and potential beneficiaries in the ecosystem. Firstly, the starting point of the ecosystem - the issuer. The Hong Kong Monetary Authority launched the "Stablecoin Issuer Sandbox" in 2024, and the first batch has already seen three groups of issuing entities and a total of 5 institutions selected, which are popular candidates for the initial licenses: Standard Chartered Bank, a joint venture between Anserve Group and Hong Kong Telecom, plans to issue a Hong Kong dollar stablecoin HKDG. JD Coin Chain Technology, plans to issue a Hong Kong dollar stablecoin JD-HKD, focusing on cross-border payments and supply chain finance. Yuan Coin Innovation Technology, plans to cooperate with Cobo and Lianlian International to issue HKDR, focusing on DeFi and cross-border payments. In addition, Ant Group's Ant Group and Ant International have also stated that they will apply for licenses in Hong Kong. Secondly, the channels for traffic monetization - virtual asset trading platforms. Licensed exchanges are the core places for the circulation and trading of stablecoins. Guosen's report shows that as of June 25th, the Hong Kong Securities and Futures Commission has issued 11 virtual asset trading platform licenses. Taking the first licensed platform in Hong Kong, OSL GROUP, as an example, its 2024 revenue structure clearly demonstrates the monetization path: 24.5% comes from SaaS services and related income, 70.2% comes from digital asset trading. Its trading fees range from 0.2%-0.28% for retail clients and 0.15%-0.225% for institutional clients based on customer types and trading methods. Next are the brokers and financial institutions that face opportunities and challenges. Morgan Stanley's report believes that compared to issuers directly sharing reserve income and exchanges charging trading fees, the profitability model of traditional brokers is more indirect and requires sharing profits with exchanges. However, brokers like Futu, which have a large retail client base and advanced technology platforms, are in a more advantageous position in the competition. The report mentions that Futu has already provided cryptocurrency trading services to customers (in cooperation with HashKey) and is actively applying for its own VATP license. Finally, the indispensable "water sellers" - infrastructure providers. The operation of the entire ecosystem cannot be separated from underlying support. The reserve bank (such as Zhongan Bank providing custody for Yuan Coin Technology), asset management companies (such as BlackRock managing Circle's reserves), and technology providers (such as Shenzhen Forms Syntron Information, Digital China Information Service Group) providing KYC/AML, payment, blockchain security services, etc., will all benefit from the industry's compliance and scaling. In summary, the regulatory process of the stablecoin market in Hong Kong provides investors with a clear industry landscape. Seizing companies with first-mover advantages in licenses, technology, and customer base will be the key to sharing this digital financial feast. This article is reproduced from Wall Street See, GMTimes edited by: Chen Yufeng.