Hong Kong has long been a financial hub, respected globally for its dynamism, robust regulatory environment and ability to adapt to new trends. Today, as the world stands at the threshold of a new era in digital finance, Hong Kong has once again demonstrated its foresight and ambition by establishing comprehensive stablecoin legislation, positioning itself as a leader in the global Web3 economy.

The passage of Hong Kong’s Stablecoins Ordinance, which will take effect on Aug 1, represents a forward-thinking initiative aimed at fostering innovation and securing the city’s position as a premier global financial center. Stablecoins — cryptocurrencies whose values are pegged to stable assets like major currencies — have rapidly emerged as critical building blocks in the evolving digital economy. By introducing detailed regulations ahead of competitors such as the United States and Singapore, Hong Kong is strategically positioning itself to attract major international players and investments in this fast-growing sector.

Ant Group’s recent announcement underscores the immediate impact of Hong Kong’s regulatory clarity. The Jack Ma-backed financial giant revealed that it plans to apply for stablecoin issuer licenses in both Hong Kong and Singapore, signaling keen interest from prominent financial-technology corporations. Ant Group, which also intends to apply for a related permit in Luxembourg, exemplifies how Hong Kong’s timely regulatory framework is already resonating positively among industry leaders who seek certainty and transparency.

This legislative strategy comes at a pivotal moment, with the global stablecoin market currently dominated by US dollar-backed tokens like Tether’s USDT and Circle’s USDC. Circle, notably, made headlines by going public on the New York Stock Exchange earlier this month, highlighting the growing mainstream acceptance of stablecoins. Hong Kong’s proactive stance offers a crucial opportunity to carve out a significant portion of this burgeoning market, especially given the city’s extensive offshore yuan reserves and its proximity to the Chinese mainland’s enormous but highly regulated financial sector.

Indeed, Hong Kong’s stablecoin legislation not only sets clear rules for issuers and investors but also aligns with broader strategic economic objectives. It reflects a determination to learn from past market setbacks — such as volatility and collapses in the cryptocurrency market — and turn those lessons into a foundation for sustainable growth and stability. Melvin Deng, CEO of digital asset trading firm QCP Capital, has rightly noted that being a “first mover” demonstrates the Hong Kong Special Administrative Region government’s recognition of stablecoins’ substantial potential and its determination to facilitate responsible innovation.

The ripple effects of this legislation extend beyond mere financial considerations. As Bo Tang from the Hong Kong University of Science and Technology aptly observed, the near-simultaneous legislative initiatives in Hong Kong and the US reflect an “intensifying East-West contest” over financial influence in the digital era. Hong Kong’s timely move positions it advantageously in this global race, potentially allowing it to set standards and influence broader regional, if not global, financial governance in the Web3 environment.

As the world rapidly transitions toward digital finance, Hong Kong’s leadership and foresight in stablecoin regulation represent an essential foundation for future economic prosperity — positioning the city as a global leader in the brave new world of Web3 finance

Moreover, the city’s new regulatory framework offers a distinct competitive advantage over regional rivals. Singapore, traditionally viewed as Hong Kong’s closest competitor in fintech and blockchain innovation, implemented its own stablecoin rules only recently. However, Hong Kong’s more comprehensive and arguably more welcoming regulatory stance creates an attractive proposition for fintech innovators who prefer clarity, consistency, and openness.

South Korea likewise has indicated a desire to accelerate its stablecoin policy, yet Hong Kong’s earlier legislative action provides a crucial head-start in shaping the regional landscape. As major financial institutions and tech firms eye stablecoin issuance, Hong Kong will undoubtedly be one of the first locations on their radar, offering opportunities for significant market growth and expansion.

The strategic benefits of moving early into stablecoin regulation are evident across multiple fronts. First, by laying down clear, detailed, and transparent rules, Hong Kong sends a clear signal to the global financial and technology community that it is serious about embracing innovation and placing consumer protection and market stability at the heart of its digital economic future. Second, it provides a powerful magnet for global tech giants, financial institutions, and blockchain startups, bringing jobs, innovation, and renewed investment into the city’s economy.

Lastly, Hong Kong’s proactive approach positions it as a critical bridge between traditional finance and emerging digital finance innovations. By pioneering stablecoin regulations, Hong Kong can leverage its existing status as a global financial hub while opening doors to new economic opportunities in decentralized finance, digital assets, and broader Web3 applications. This strategic alignment ensures Hong Kong will remain relevant and influential on the global stage for years to come.

Hong Kong’s stablecoin legislation is not merely a technical regulatory development; it is a strategic and visionary step to ensure the city remains at the forefront of global financial innovation. The decision by Ant Group and other industry leaders to consider Hong Kong as their preferred jurisdiction for stablecoin issuance serves as clear evidence of the city’s growing attractiveness and potential in the global Web3 ecosystem.

As the world rapidly transitions toward digital finance, Hong Kong’s leadership and foresight in stablecoin regulation represent an essential foundation for future economic prosperity — positioning the city as a global leader in the brave new world of Web3 finance. 

The author is the convener at China Retold, a member of the Legislative Council, and a member of the Central Committee of the New People’s Party.

The views do not necessarily reflect those of China Daily.