Stablecoins, which are cryptocurrencies pegged to a traditional fiat currency, play a significant role in the cryptocurrency market. According to data from CoinGecko, a cryptocurrency data aggregator, stablecoins comprise over 7 percent of the cryptocurrency market, with a combined value of nearly $261.6 billion. While still small in comparison to the bitcoin market, which alone makes up over 62 percent of the crypto market, stablecoins are a growing space, with the number issued increasing by around 16 percent in 2025 alone.

Originally, stablecoins were developed to serve as a store of value, allowing investors to exit volatile positions without having to convert to fiat money. Now, with the advancement and adoption of blockchain technology, stablecoins are beginning to play a larger role in global trade, from remittances to payments — all without needing to go through an intermediary like a bank or money-remittance company, and their fees.

In the burgeoning stablecoin space, US-dollar-pegged cryptocurrencies dominate, making up around 98.4 percent of the market, representing a new vector for US-dollar influence. Moreover, the US Congress has passed, and US President Donald Trump has signed into law, the GENIUS stablecoin bill (the GENIUS Act), which will regulate the stablecoin industry.

This is where Hong Kong’s Stablecoins Ordinance, passed in May, comes in. This landmark ordinance, which establishes a licensing regime for fiat-referenced stablecoin issuers in Hong Kong, places stablecoins under the direct oversight of the Hong Kong Monetary Authority. The city has the potential to be a hub for converting the freewheeling crypto environment into a structured domain of regulated finance.

Hong Kong is the largest offshore renminbi center, processing over 76 percent of all offshore RMB payments globally. The city has a unique political status under the “one country, two systems” framework, which allows Hong Kong to operate a legal financial system separate from the Chinese mainland’s, fostering an environment of innovation. While cryptocurrency trading and issuance remain prohibited on the mainland, Hong Kong allows for experiments in cryptocurrency products, such as spot trading, exchange traded funds, and mutual funds.

In the case of Hong Kong, the passing of its Stablecoins Ordinance is also an opportunity for the city to lead the race to become Asia’s crypto hub, especially since Singapore is tightening its crypto licensing rules, in which digital token service providers in Singapore that only serve overseas markets need to be licensed, or risk being asked to leave the country

In light of this, the potential launch of a yuan-backed stablecoin in Hong Kong could function as an alternative to US-dollar-pegged stablecoins to settle international trade transactions. According to Xiao Feng, chairman of Hong Kong-based crypto exchange operator Hashkey, many Chinese exporters now use dollar stablecoins as “more and more overseas merchants are sending payments in USDT”, the most popular stablecoin.

And a yuan stablecoin could change that. After all, in terms of economic activity, based on a report by the Society for Worldwide Interbank Financial Telecommunication, the yuan is the second-most-used currency in trade finance. Since China is widely regarded as the world’s factory, the yuan is primarily used in the direct settlement of trade with Chinese entities. On the crypto side, Crypto HK, an over-the-counter crypto exchange in Hong Kong, reports that the monthly trading volume of USDT by its Chinese clients specifically for trade settlement has surged fivefold since 2021, emphasizing the growing demand for stablecoins in cross-border trade settlements.

Commercial tech giants Ant Group and JD are looking to seize the opportunity. They are proactively lobbying the People’s Bank of China to authorize yuan-based stablecoins in Hong Kong, according to reports. These companies had expressed their aspirations to apply for stablecoin licenses before Hong Kong’s stablecoin legislation took effect on Aug 1, and the approval of a yuan-backed stablecoin would offer an excellent opportunity to showcase the capabilities of the yuan as a global trade settlement currency.

After all, for JD, a global leader in ecommerce and logistics, a yuan-backed stablecoin would streamline payments from its vast network of international suppliers and customers. In the case of Ant Group, the fintech company behind Alipay, it offers the opportunity to expand into the world of cross-border business-to-business payments.

With regulatory innovation in Hong Kong and support from mainland tech giants, the final requirement needed for an offshore digital yuan stablecoin is permission from the State. A yuan-backed stablecoin will offer competition to the dominance of dollar-backed stablecoins, while furthering the internationalization of the yuan, potentially gaining some trade settlement flows that are currently utilizing the dollar ecosystem.

In the case of Hong Kong, the passing of its Stablecoins Ordinance is also an opportunity for the city to lead the race to become Asia’s crypto hub, especially since Singapore is tightening its crypto licensing rules, in which digital token service providers in Singapore that only serve overseas markets need to be licensed, or risk being asked to leave the country. This could affect its standing, with major exchange operators like Bybit and Bitget having to suspend or cease activities in Singapore, as they do not have a Singapore license.

The author is a Singapore-based senior research analyst at a crypto data firm.

The views do not necessarily reflect those of China Daily.