HKMA Issues First Stablecoin Licenses to HSBC and Standard Chartered

After missing its deadline last month, the Hong Kong Monetary Authority has finally issued its first stablecoin licenses to HSBC and Standard Chartered, consistent with our earlier analysis in the article "Hong Kong Dollar Stablecoins Don't Need to Be USDC."

Although the outcome itself was no surprise, it was disappointing.

Lately, I’ve been reading Professor Jiang Xueqin’s work on geopolitical game theory, and Rain has also written an article titled “Hong Kong Stablecoins: A Carefully Designed ‘Open Strategy.’” Putting these two things together, I’d like to take a wild, game-theoretic look at this licensing event—for a bit of fun.

Jiang Xueqin analyzes Trump’s logic regarding a potential war with Iran as follows: On the surface, this war appears to be a foolish blunder. But if we apply game theory and adopt a different assumption—that Trump actually wants this “failure”—then he might be a genius.

This article applies the same framework to Hong Kong’s stablecoin to hypothesize a top-tier "open strategy."

The first batch of stablecoin licenses issued by the Hong Kong Monetary Authority yesterday is the version the market least wanted to see:

Standard Chartered, HSBC; Bank of China (Hong Kong) is absent.

This outcome is disappointing. Foreign banks have no inherent incentive to issue HKD stablecoins, while strategic players like Bank of China (Hong Kong) have been sidelined. Key stakeholders—securities firms, exchanges, and internet companies—have been systematically excluded since the legislative consultation stage.

With the first batch of licenses issued, the narrative around Hong Kong’s stablecoins has been sentenced to a suspended death penalty.

But if you were the HKMA, would you select such a list?

You have full experience with the 2024 Project Ensemble sandbox, you’ve observed the entire case of the digital RMB from inception to promotion, and you hold the inherent advantage of the SFC + HKMA dual-track system—yet you’ve selected a list that can’t even establish a basic business loop?

Unless this list, which disappoints everyone, was never intended to satisfy the market.

To understand this list, you need a different framework.

Lately, I’ve been watching Jiang Xueqin’s series on game theory. In his episode on April 2, which discussed Trump and a potential war with Iran, there was a passage that left a deep impression on me:

Jiang Xueqin’s argument structure is simple: If you assume Trump wants to “win,” then every step he takes is so foolish as to be inexplicable. But if you reverse the assumption—that he actually wants to “lose this war” and use a controlled collapse in the Middle East to shift global energy dependence to North America—then every seemingly idiotic action instantly becomes part of a coherent strategy.

This is called a managed collapse. It’s not about avoiding failure, but about creating a failure that benefits you.

Looking back, if the goal of this licensing round was to "grow the Hong Kong dollar stablecoin industry," then every detail becomes hard to explain—awarding licenses to the least motivated institutions, setting barriers so high that they’re commercially unviable, repeatedly challenging applicants’ business models, and excluding the most strategically committed players.

But what if the assumption is different—that the licenses were never intended to support the commercial stablecoin industry itself?

Then everything falls into place.

Looking further under this assumption, the scenarios, institutions, and infrastructure all align.

Each applicant will present three stories: cross-border payments, RWA, and C-end consumption.

But all three are untenable.

A. Cross-border payments are a false proposition

The typical flow is: a company in Country A uses fiat to mint Stablecoin A, exchanges it for Stablecoin B on a secondary market, pays the company in Country B, and the Company in Country B redeems fiat B. At its core, this uses Web3 exchanges to reduce costs in foreign exchange services traditionally monopolized by banks—this is financial inclusion for small and medium-sized enterprises, and the logic holds.

But in this process, the stablecoin's lifecycle exists only at the moment of transfer.

Businesses in Country B receive stablecoins, but unless they immediately proceed with the next trade, they still need to redeem them—and ultimately require fiat currency. What you need is not a one-time transfer, but a closed loop that always has a "next buyer."

Rain highlights a crucial point—the more deadly one is Fisher’s equation: MV = PT, where the money supply multiplied by its velocity equals the price level multiplied by real output. The velocity of stablecoins on-chain is an order of magnitude—or more—higher than that of traditional banking settlements.

This means that fewer stablecoins are needed to support the same volume of trade. The more successful cross-border payments become, the lower the demand for stablecoin reserves.

This is not a closed loop; it's an open loop.

B. RWA is a false proposition

RWA, in essence, is all the same thing: the tokenization of asset shares.

The fundraising is conducted in stablecoins, but after receiving the stablecoins, the asset manager must purchase the underlying assets—and sellers of these assets almost never accept stablecoins, as their goal in securitizing assets is typically to exit or optimize cash flow, and no one wants to hold stablecoins.

The result is: the lifecycle of stablecoins in RWA scenarios consists only of the fundraising period.

C-end consumption

The Hong Kong retail market is too small to mention.

All three stories are false premises. The HKMA, as the regulatory body that has been involved throughout, understands this better than any applicant.

Then why does it still issue licenses?

HSBC and Standard Chartered may not have come with strategic intent.

HSBC’s involvement here may be passive. This is understandable—HSBC’s strategic focus has long moved away from stablecoins; its true priority is tokenized deposits. For HSBC, applying for a HKD stablecoin is more of a defensive move than an active strategy.

Standard Chartered has some initiative, but Hong Kong is merely one node in its global footprint. HKD stablecoins can be integrated into its Libeara platform, but Hong Kong has never been its primary market.

The truly committed Bank of China (Hong Kong) with local market presence—absent.

Strange? Not at all. As long as you understand that the Hong Kong government is designing a mechanism to make "voluntary" the optimal choice:

Rule One: Licenses are issued only to note-issuing banks.

This immediately creates an exclusive club. If HSBC does not apply, Standard Chartered will be the only name on Hong Kong’s digital HKD track. For an institution that regards its status as a Hong Kong note-issuing bank as a core 160-year brand asset, this would be an unacceptable symbolic loss. Therefore, HSBC must join.

Rule Two: The technical and compliance barriers are extremely high.

Building a multi-million-dollar HSM facility, an AML architecture, on-chain monitoring, and a reserve asset pool turns stablecoin issuance into pure cost expenditure, not a business. Normal commercial institutions would exit after calculating their ROI. But HSBC and Standard Chartered cannot exit— the first rule has already locked them in.

They’re not here to make money; they’re here to keep their seats.

Rule Three: Repeatedly challenge the business logic.

This is the most brilliant part. During the interview stage, the Hong Kong government repeatedly asked applicants the same question: Why are you issuing it yourself instead of using someone else’s? This effectively tells applicants in advance— I don’t care whether you can make money. The only answer that will allow an applicant to move forward is: “I can help Hong Kong run this infrastructure.”

When the three rules are stacked together, the Hong Kong government has actually forced nothing.

HSBC and Standard Chartered voluntarily applied, voluntarily invested tens of millions of U.S. dollars, and voluntarily assumed the costs of user education and scenario development. Yet each of these voluntary choices represents the optimal option under the regulatory framework established by the Hong Kong government.

This is not a command; it's a design.

It’s no longer surprising that Bank of China (Hong Kong) is absent—the entities with the strongest strategic intent are not suited to be infrastructure contractors. Strongly strategic players will treat stablecoins as their own commercial products, following their own timelines and objectives. What the Hong Kong government needs is infrastructure, not commercial products.

Moreover, Bank of China was already on a different line.

The HKMA truly wants to do e-HKD.

e-HKD is the Hong Kong government's digital currency—the Hong Kong version of the digital renminbi. The goal is clear: gradually migrate interbank settlement and retail payments to a blockchain-based HKD issued by the central bank. This is the next-generation financial infrastructure the Hong Kong government has been promoting for the past several years, and it represents the culmination of the entire strategy.

The 2024 Project Ensemble sandbox was the first attempt along the e-HKD pathway: banks and the Hong Kong government jointly maintain a consortium blockchain, tokenize deposits, and restructure interbank clearing and settlement. The technology worked, but progress stalled—only HSBC and Standard Chartered were willing to participate; smaller banks lacked incentive.

The reason it’s not moving isn’t technology—it’s the lack of demand-side momentum. No one is willing to pay for the costs of user education, scenario development, or technical experimentation.

The most recent footnote is in Hong Kong. In May 2024, the digital yuan was officially integrated into Hong Kong’s Faster Payment System (FPS), becoming the world’s first bilateral connection between a central bank digital currency and a real-time payment system. Two years later, by March 2026, there were approximately 80,000 digital yuan wallets in Hong Kong, 5,200 participating merchants, and 18 local banks involved in top-ups—still a far cry from “taking off” in a market of 7.5 million people.

Hong Kong residents actually use Alipay HK, WeChat Pay HK, and Faster Payment System in their daily lives.

Incidentally, returning to the question in Section Four: Why is Bank of China (Hong Kong) absent from the stablecoin list? The primary institution driving the implementation of the digital RMB in Hong Kong is precisely Bank of China (Hong Kong). In October 2025, Bank of China (Hong Kong) partnered with Circle K and FreshUp, enabling digital RMB payments at over 380 convenience stores and 1,200 vending machines across Hong Kong.

In other words, the Bank of China has consistently focused its strategy on the digital yuan. Its absence from the stablecoin list is not due to exclusion—it’s simply because it’s already engaged in something more direct.

The Hong Kong government clearly recognizes: if it relies solely on itself, e-HKD will never be successfully launched. That’s why stablecoins have gained momentum.

Stablecoins provide the Hong Kong government with something it could never create on its own: free demand-side momentum. Hype, media, KOLs, VCs, and global narratives—all for free. What remains is then a natural progression.

Phase One: Have licensed banks drive user acquisition, use cases, and technology under the narrative of "commercial stablecoins." HSBC and Standard Chartered invest their own funds to build HSM data centers, implement KYC/AML protocols, educate the public on using on-chain Hong Kong dollars, convince merchants to integrate, and validate cross-border B2B scenarios—all of which e-HKD originally intended to do but failed to accomplish.

Phase Two: Once user habits, clearing practices, and technology stacks are established, the Hong Kong government launches its clearing layer as the mandatory pathway for interbank settlement, integrating licensed stablecoins into this system. Later, e-HKD is launched as a native asset, and licensed stablecoins gradually evolve into an "upper-layer wrapper" of e-HKD.

Users will see the same brand, wallet, and interface, but the underlying settlement has been transitioned from commercial banks to the central bank.

This pathway almost exactly mirrors the "two-tier operational" structure of the Digital RMB: direct participants on the front end, and the central bank on the back end.

The same architecture, two different paths. The difference lies solely in this: China is pushing top-down with force, while Hong Kong is leveraging momentum from the bottom-up.

The Hong Kong government should use the stablecoin regulations to promote e-HKD, rather than relying on e-HKD to promote itself.

Hong Kong's core assets are currently depreciating.

Hong Kong’s status as an international financial center over the past several decades has fundamentally rested on one thing: access to the U.S. dollar clearing system. Stock financing, interbank lending, trade settlement, and private banking all rely on this foundation.

However, this asset is currently facing pressure on three fronts simultaneously—politicalization of the dollar system has made access uncertain, the sluggish return of Chinese-listed stocks has weakened the primary market, and geopolitical conflicts have raised the cost of traditional correspondent banking channels.

The competition for the next global financial center is no longer about who has the larger stock market or more private banking assets, but who controls the next-generation financial infrastructure and clearing sovereignty.

The U.S. is incorporating stablecoins into the dollar clearing system through the GENIUS Act, making USDC a digital extension of the dollar. Europe is using MiCA to transform EMT into a digital version of the euro clearing system. China is restructuring cross-border RMB clearing using the Digital Yuan.

The three major currency zones are all doing the same thing: removing their currency's clearing sovereignty from the correspondent banking architecture of the SWIFT era and placing it within their own CBDC or stablecoin frameworks.

Hong Kong has no monetary sovereignty—under the linked exchange rate system, the issuance of the Hong Kong dollar is inherently tied to the U.S. dollar. However, what Hong Kong can strive for is settlement sovereignty: ensuring that Hong Kong dollar settlements no longer rely entirely on traditional SWIFT and correspondent banking, but instead operate on a next-generation infrastructure controlled by the HKMA.

Looking at this license issuance from this perspective, everything becomes clear:

The narrative around "commercial stablecoins" is never an end in itself, but a tool;

The purpose of HSBC and Standard Chartered is to assist the Hong Kong government in user education and scenario implementation;

Bank of China Hong Kong's absence is not an oversight, but a deliberate effort to keep strategic intentions low-key;

VAOTC may never truly materialize, as its historical mission of crypto speculation has already been fulfilled.

This is a controlled narrative downgrade—burning off the surface-level hype of Web3 while building the underlying sovereignty of清算.

As Jiang Xueqin said, failure is the point.

The key is who designed this "failure" and who truly took something from it.

Does Hong Kong have Web3? Thinking back on our noisy years, it seems so. But from a historical perspective, it may never have existed.

What remains when Web3 is distilled down?

In fact, Hong Kong has never needed Web3—what Hong Kong needs is a ticket to becoming the next-generation financial hub.

And this ticket of admission is being paid for by the first batch of licensed stablecoin issuers.