Stablecoin

Future

Value

America

Startup

<ul>
 <li>Regulatory Philosophy – Focuses on Hong Kong choosing stability over speed through bank-level standards</li>
 <li>Institutional Screening – Explains the ecosystem transformation from Web3 inclusivity to institutional control</li>
 <li>Strategic Positioning – Frames the cooling as deliberate positioning for long-term global competitiveness</li>
</ul>
Concise summary highlighting the shift from euphoria to strategic cooling in Hong Kong’s stablecoin regulation.
<h2 id="chapter-3-deep-impact-institutional-screening-and-ecosystem-contraction">Chapter 3: Deep Impact—Institutional Screening and Ecosystem Contraction</h2>
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When market enthusiasm receded, Hong Kong’s stablecoin ecosystem exhibited a typical state of “institutional settling”: surface calm, but accelerating stratification.
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From September 2025 to present, the HKMA has not announced new batches of applicants, while several initially high-enthusiasm startup teams quietly withdrew.
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In contrast, several institutions with substantial capital and complete compliance architecture—Standard Chartered, Ant International, WeLab, Animoca—actually became the remaining main players.
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This structural change is not accidental but the inevitable result of institutional screening.
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The Stablecoin Issuance Ordinance’s design intent was to filter potential risks through high barriers, not to create space for innovation.
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Taking reserve management as an example, the ordinance requires stablecoin issuers to hold 100% highly liquid asset reserves, with at least 80% in cash or short-term government bonds, and must be held by independent trustees.
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This means any company planning to issue stablecoins needs bank-level financial strength and risk control systems.
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For startups, this requirement almost directly declared their exit fate.
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William Wong, a fintech partner at Jun He Law Offices’ Hong Kong office, told the Hong Kong Economic Journal: “After the ordinance was introduced, market understanding of regulatory attitudes showed deviation. Many institutions thought this was ‘policy encouraging innovation,’ but actually it was ‘policy guiding risk.’ The HKMA’s primary goal is not to expand the market but to ensure that any approved institution can withstand liquidity and governance stress tests.”
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His view was widely cited within the industry, becoming a key footnote explaining the “cooling trend.”
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Under institutional logic, capital and compliance resources became the new “moat.”
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Institutions able to afford eight-figure Hong Kong dollar compliance costs are typically already part of the financial system, while entrepreneurs hoping to leverage technological innovation to open regulatory windows are blocked out.
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Within just two months, Hong Kong’s stablecoin track completed structural reconstruction:
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<ul>
 <li style="font-weight: 400;">Entrepreneurs exit, institutions take over</li>
 <li style="font-weight: 400;">Traffic narratives dissipate, institutional trust rises</li>
 <li style="font-weight: 400;">“Web3 economy” gives way to “financial landscape”</li>
</ul>
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But the flip side of institutional screening is ecosystem contraction.
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In Hong Kong’s past Web3 narrative, “openness” and “accessible to all” were important spirits.
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Now, this inclusiveness has been replaced by capital requirements and KYC systems. The ordinance requires all stablecoin users to complete identity verification (KYC) and source of funds disclosure before use—standard in traditional finance but in direct collision with decentralized community ideals.
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A developer who participated in stablecoin projects wrote on X: “Hong Kong wants compliance, not consensus. Web3’s core is trusting algorithms, not trusting audits.” Similar voices frequently appear in communities. Many “crypto natives” believe strict KYC systems will stifle innovative vitality and cause Hong Kong’s stablecoin market to lose its intended network effects.
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In their view, for stablecoins to realize value, they must be built on free circulation and anonymous trust, not regulatory lists.
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<img loading="lazy" src="https://www.coinrank.io/wp-content/uploads/2025/10/20251017-104420.jpg" alt="" width="1200" height="502">
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However, regulators clearly do not agree with this logic.
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In response to related questions, the HKMA emphasized: “Regulatory transparency is the foundation of trust. Only verifiable systems can support broader market applications.”
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This response is both calm and firm—Hong Kong has not denied Web3’s innovative potential, but it believes controllable trust is more important than free speed.
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The result is that Hong Kong’s stablecoin ecosystem has gradually become “institutionalized”: lawyers, accountants, custodians, and auditors have become the true core players, while developers, entrepreneurial teams, and community governance actors recede to secondary positions.
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Regulation transformed stablecoins from “community assets” to “financial products,” thereby completely changing their ecosystem structure.
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This contraction brings two consequences.
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<ul>
 <li style="font-weight: 400;">On one hand, Hong Kong’s financial stability has significantly improved, with systemic risks nearly eliminated</li>
 <li style="font-weight: 400;">On the other hand, the vitality originally dependent on community consensus and open innovation has been weakened</li>
</ul>
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As Associate Professor Wong Chi-hang of the University of Hong Kong Faculty of Law stated: “Hong Kong’s stablecoin regulation sets standards for financial security but also makes the threshold for innovation higher than capital itself.”
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From a macro perspective, this phase’s “cooling” is a market de-bubbling process and a stage where regulation completes institutional screening.
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From a micro perspective, it means Hong Kong’s Web3 ecosystem is no longer an entrepreneur’s paradise but has become an experimental ground for capital and institutions.
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Between financial stability and technological freedom, Hong Kong chose the former—this is a rational choice but also a costly path.
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Institutional screening allowed Hong Kong to gain order but lose some imagination. But in a global financial system pursuing trust, order itself is the scarcest resource.
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This is Hong Kong’s bet: when other markets are still trial-and-error, it wants to become the first trusted sample.
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<img loading="lazy" src="https://www.coinrank.io/wp-content/uploads/2025/10/3.png" alt="" width="1618" height="757">
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<h2 id="chapter-4-risks-and-opportunities-rebalancing-institutional-dividends">Chapter 4: Risks and Opportunities—Rebalancing Institutional Dividends</h2>
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As the market gradually calms and regulatory order re-establishes, the true significance of Hong Kong’s stablecoin policy begins to emerge.
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The dramatic volatility over three months, from boom to contraction, was not merely a policy pace adjustment but a redistribution of “institutional dividends.” The cooling appears to be contraction but is actually strategic rebalancing.
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<h3 id="4-1-short-term-pain-capital-retreat-and-sentiment-cooling">4.1 Short-Term Pain: Capital Retreat and Sentiment Cooling</h3>
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In the short term, the costs of cooling are obvious.
<ul>
 <li style="font-weight: 400;">Startup withdrawals sharply reduced ecosystem innovation vitality</li>
 <li style="font-weight: 400;">Capital flows slowed, investors became cautious about policy expectations</li>
 <li style="font-weight: 400;">User-side KYC thresholds directly compressed potential demand</li>
</ul>
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HKMA data shows that since the ordinance took effect, new fintech startup registrations decreased nearly 20% month-over-month, with some projects moving overseas or suspending operations.
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This situation made Hong Kong appear “quiet” for a time in the Asian Web3 landscape. But this quiet is not market collapse but system self-repair.
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An HKMA insider mentioned at an October closed-door roundtable: “We would rather have fewer projects in the short term to ensure those remaining can go far.”
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This statement, to some extent, reveals Hong Kong’s regulatory philosophy—in the early stages of institutional transformation, contraction is a proactive choice, not a passive consequence.
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In other words, short-term quietness is the price Hong Kong pays in exchange for long-term certainty.
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<h3 id="4-2-medium-term-reshaping-rising-value-of-institutional-trust">4.2 Medium-Term Reshaping: Rising Value of Institutional Trust</h3>
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Entering Q4, the market gradually realized that the HKMA’s regulatory path is closely related to its global strategy.
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Rather than “over-regulation,” this is “institutional advancement.”
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Europe’s MiCA just entered operational phase, the US GENIUS Act remains in implementation, while Hong Kong has already established operational licensing systems, audit mechanisms, and redemption standards at the execution level.
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This pioneering institutional certainty won Hong Kong an invisible dividend—international trust reflow.
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Several international settlement banks and payment institutions clearly stated in recent regulatory communications that if Hong Kong stablecoin projects achieve cross-border settlement compliance, they will prioritize access.
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This shows that despite short-term ecosystem constraints, Hong Kong’s “compliance image” is becoming a new form of soft power.
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More importantly, this institutional trust does not exist in isolation.
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The HKMA is using stablecoin regulation as a foundation to lay technical and legal interfaces for the digital Hong Kong dollar (e-HKD) and mBridge cross-border settlement system.
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In other words, the stablecoin regulatory framework is not just “managing coins” but pre-embedding institutional scaffolding for Hong Kong’s digital currency system.
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This gives Hong Kong a highly competitive role: compliant stablecoin clearing hub.
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Therefore, stablecoin regulation’s “cooling” may actually become Hong Kong’s starting point for entering the next financial cycle.
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<h3 id="4-3-long-term-positioning-from-innovation-frontier-to-order-model">4.3 Long-Term Positioning: From Innovation Frontier to Order Model</h3>
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From a long-term perspective, Hong Kong’s “slowness” is strategic reorganization. Globally, the crypto market is entering an institutionalization era.
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Regulatory goals in Europe and America are no longer “whether to regulate” but “how to regulate”; Asian competition has also gradually shifted from “technological innovation” to “institutional export.”
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In this round of competition, if Hong Kong can stabilize institutional credibility, it could assume the role of “regional regulatory intermediary” in the next phase.
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However, this path is not without risks.
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The flip side of institutional dividends is contraction of innovation space.
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High barriers mean only large financial groups can bear costs; entry channels for small and medium teams are essentially sealed.
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A former stablecoin entrepreneur wrote in a Ming Pao commentary: “Hong Kong’s stablecoins are not designed for the future but to correct the financial system of the past.“
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While extreme, this statement reveals the real dilemma: when all innovation requires licenses, innovation itself is no longer open.
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But from a macro perspective, this is precisely Hong Kong’s “institutional choice.”
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In an era of highly divided geopolitics and scarce financial trust, regulatory certainty itself is competitiveness.
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Hong Kong achieved market screening through “proactive cooling,” exchanging safety for credibility and slow pace for sustainability.
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In coming years, when stablecoins form cross-border collaborative systems with RWA and central bank digital currencies (CBDC), Hong Kong’s role may no longer be “innovation pioneer” but “order model.”
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<h2 id="chapter-5-conclusion-risk-is-opportunity">Chapter 5: Conclusion—Risk is Opportunity</h2>
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On the surface, Hong Kong’s tightening stablecoin regulation evokes “missed opportunities”;
But from a longer cycle, it may be at a turning point of “winning the future.” Risk and opportunity are not opposites but two sides of the same coin.
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For Hong Kong, the real opportunity lies not in who issues coins faster but in who first establishes trustworthy institutions.
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When short-term enthusiasm recedes and regulatory logic returns, Hong Kong’s competitive advantage is also shifting from “policy stimulus” to “rule export.”
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It chose to sacrifice some innovation speed in exchange for systemic stability, international trust, and institutional discourse power—these are precisely the most expensive assets in the global financial system.
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Hong Kong’s stablecoin story has not ended. It has merely moved from the narrative stage to behind the scenes of order.
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Future winners will no longer be storytellers but institutions that can survive institutional cycles. The capital feast has nothing to do with the masses.
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Read More：
<a href="https://www.coinrank.io/crypto/the-stablecoin-hype-fades-hong-kongs-moment-of-regulatory-composure-1/" rel="noopener noreferrer nofollow">The Stablecoin Hype Fades: Hong Kong&amp;#8217;s Moment of Regulatory Composure 1</a>
〈<a href="https://www.coinrank.io/crypto/the-stablecoin-hype-fades-hong-kongs-moment-of-regulatory-composure-2/" rel="noopener noreferrer nofollow">2-The Stablecoin Hype Fades: Hong Kong’s Moment of Regulatory Composure</a>〉這篇文章最早發佈於《<a href="https://www.coinrank.io" rel="noopener noreferrer nofollow">CoinRank</a>》。

2-The Stablecoin Hype Fades: Hong Kong’s Moment of Regulatory Composure

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