Is 77 stablecoin applications a lot or a little?

Author: Zhang Feng

A spokesman for the Hong Kong Monetary Authority stated that as of August 31, there were a total of 77 expressions of intent to apply for a stablecoin license, including banks, technology companies, securities/asset management/investment firms, e-commerce, payment institutions, and startups/web3 companies.

After the news broke, the market reacted differently. Some believe this reflects regulatory prudence, while others question whether this number is sufficient to support Hong Kong's ambitions as an international financial center. From the perspective of the application prospects of stablecoins, the demand for industry empowerment, and Hong Kong's positioning in international competition, the 77 applications are both a positive signal and a reflection of deeper challenges.

1. Regulatory Perspective: Encouraging Innovation while Being Cautiously Pragmatic

Stablecoins, as a type of cryptocurrency anchored to fiat currency, are typically pegged to the value of fiat currencies or a basket of assets, serving as a bridge between traditional finance and the digital currency world. Of course, the risks associated with stablecoins cannot be ignored, including lack of transparency regarding reserve assets, risk of bank runs, potential systemic financial risks, and the possibility of being used for money laundering and illegal transactions. For this reason, the Hong Kong Monetary Authority adopts a cautious regulatory approach, filtering qualified issuers through a strict access mechanism.

The number of 77 applications reflects the market's confidence in Hong Kong's stablecoin regulatory framework to some extent. Compared to some jurisdictions that completely prohibit or are excessively lenient, Hong Kong is trying to find a balance between innovation and stability. This prudent regulatory principle helps to mitigate risks, protect investors' interests, and lay the foundation for the long-term stability of the financial system.

However, caution does not equate to conservatism. If regulations are too strict, it may lead to a lack of innovation and even cause Hong Kong to miss out on a leading position in the digital finance sector. Therefore, behind the 77 applications, what is more important is how the regulatory body selects projects that meet risk control requirements while also promoting industry development.

2. Industry Perspective: Meeting Scenarios and Appropriate Competition

From the perspective of stablecoin applications, industrial empowerment requires more choices and richer application scenarios. Stablecoins are not only a payment tool but also an important infrastructure for the future digital economy. They can be used in various fields such as cross-border trade settlement, supply chain finance, smart contracts, and DeFi (decentralized finance), injecting new vitality into the traditional financial system.

If only a few stablecoin issuers are approved, the market may face limited choices and insufficient competition. In contrast, moderate competition can drive technological innovation, lower transaction costs, and improve service quality. The 77 applications indicate strong market interest in stablecoin issuance, but if ultimately only a very small number of applications are approved, it could stifle market diversity and innovation.

In addition, different application scenarios may require different types of stablecoins. For example, some stablecoins may be more suitable for commodity trading, while others may focus more on retail payments or cross-border remittances. If there are only a few types of stablecoins in the market, their application scope may be limited. Therefore, from the perspective of empowering the industry, 77 applications are not only few, but may even require more diversified participants.

3. Financial Perspective: International Competition and Global Vision

Hong Kong, as an international financial center, is facing fierce competition from cities such as Singapore, Dubai, and London. In the field of digital finance, many countries and regions are actively exploring the development paths of central bank digital currencies (CBDC) and stablecoins. For example, Singapore has launched multiple stablecoin pilot projects, while the European Union has also passed the Markets in Crypto-Assets Regulation (MiCA), which provides a clear regulatory framework for crypto assets.

In this context, Hong Kong needs to have a global perspective, with a more open mindset and more innovative policies to strengthen its position as an international financial center. The offshore market has ample space, and international competition requires Hong Kong not only to keep up with trends but also to lead them. If the approval process for stablecoin issuance is too cautious, it may result in talent, capital, and projects flowing to other more friendly jurisdictions.

On the other hand, financial innovation requires adequate space. The original intention of regulation is to prevent risks, but it should not come at the expense of innovation. Hong Kong can provide opportunities for testing and iteration of stablecoin projects through mechanisms like "regulatory sandboxes," encouraging innovation while controlling risks. The 77 applications are a starting point, but the key issue that Hong Kong needs to consider is how to cultivate internationally competitive projects from these applications.

4. The Dialectic of More and Less: Basic Principles and Infrastructure

Are 77 applications more or less? The answer does not lie in the absolute numbers, but rather in how to seize the opportunities of stablecoins. Generally speaking, stablecoin operations require projects with strong technical capabilities and clear business models, rather than merely competing for licenses without actual operational capacity.

Therefore, the task of regulators is to grasp the basic logic of stablecoin operation and regulation, which is to encourage innovation while protecting user rights and maintaining an orderly market competition environment. On one hand, it is necessary to avoid excessive concentration to prevent the market from being monopolized by a few giants; on the other hand, a classification and tiered regulation model can also be considered to avoid resource waste and increased regulatory difficulty.

In addition, regulators must realize that the development of stablecoins relies not only on the number of issuers but also on the support of accompanying infrastructure, including compliant trading platforms, custodians, auditing mechanisms, and legal frameworks. Hong Kong needs to advance in these areas simultaneously to provide a solid foundation for the widespread adoption of stablecoins.

V. The Road Ahead: Balancing Innovation and Regulation

For Hong Kong, stablecoins are both an opportunity and a challenge. Finding a balance between innovation and regulation will directly impact Hong Kong's competitiveness in the digital finance era. The following points may be worth considering:

Classification and Hierarchical Supervision Mechanism: Different regulatory standards can be designed based on the scale, application scenarios, and risk levels of stablecoins. For example, stricter regulations may be implemented for systemically important stablecoins, while relatively relaxed rules may apply to smaller or specific-purpose stablecoins.

International Cooperation: Stablecoins often have cross-border characteristics, and Hong Kong can collaborate with other jurisdictions to jointly establish global standards to avoid regulatory arbitrage and fragmentation.

Encouraging Innovative Experiments: By providing a real testing environment for stablecoins through "regulatory sandboxes" and pilot projects, it helps regulators and market participants better understand their risks and potential.

Enhance User Risk Education: As an emerging financial tool, many users may not fully understand the operational mechanisms and risks of stablecoins. Strengthening user risk education is an important means of risk prevention.

77 applications for stablecoins not only reflect the market's confidence in Hong Kong as a financial center but also reveal the enormous potential of the stablecoin industry. From the perspective of application scenarios and industry empowerment, this number may still be insufficient to meet future market demand; however, from the standpoint of regulatory caution, ensuring the quality and compliance of each application is equally important.