Written by: Liu Honglin
The Market Can Be Hot, But Don't Let Your Brain Overheat
With Hong Kong's Stablecoin Regulation about to be officially implemented, market enthusiasm is rapidly rising, and many institutions are beginning to prepare for issuing coins and applying for licenses. However, the overheated market response makes me can't help but worry a bit. Why? In this article, Lawyer Liu wants to chat with everyone about this.
Those who have experienced the alliance chain era are no strangers to this "policy-favorable + industry-pursued" rhythm. Back then, alliance chain was seen as the "optimal solution for blockchain implementation", with everyone from banks to internet giants wanting to set up a "multi-party node laboratory". The result? Project teams got their budgets, and projects died upon completion.
The actual business departments were unwilling to put data on the chain, and technical teams could only submit demonstration systems as KPI completion. From the outside, it looked like "blockchain technology exploration success", but inside, it was "business cold start failure".
If stablecoins follow the same path today - preparing compliance and technology first, and then trying to get business departments to cooperate - it will likely be the same familiar awkward scenario.
In Hong Kong, "grabbing licenses" has become a popular pursuit. In the past two years, whether for virtual asset exchanges or asset management companies, almost everyone has followed the principle of "get the license first, discuss business later". Stablecoins are naturally the latest extension of this logic: as if having a license would automatically attract market interest. But reality is often different. What truly established USDT and USDC was not their perfect regulatory structure, but the three clear business channels they hit upon from the start: cross-exchange asset arbitrage, OTC exchange, and DeFi collateral. Without these high-frequency, highly authentic capital flows, any "most regulation-friendly" stablecoin is just an empty promise.
USDT might be criticized as a "black market dollar", but it has indeed penetrated the fee collection points of thousands of exchanges and wallets globally. Any new stablecoin issued in Hong Kong that cannot be used for local treasury payments, Octopus card top-ups, or cross-border tuition payments will be merely a "decorative coin". It may have a complete license and clear responsibilities, but will never cross the threshold called "real demand".
Three Major Stablecoin Factions
Currently, the paths to finding real demand for stablecoins are quite different.
First Path: Financial Infrastructure Faction
These projects mostly originate from banks or large financial holding companies, with a direct goal: making "digital Hong Kong dollar/digital US dollar" an electronic bill that banking systems can understand, capable of running by plugging into existing clearing networks. Their success is measured not by wallet downloads, but by connecting more settlement banks, establishing more payment channels, and obtaining regulatory pilot quotas. Who are their target customers? Small and medium-sized export factories, trade companies needing multi-currency settlement, or financial institutions helping clients "day-cut" funds. These customers care about three things: fast arrival (preferably instant), traceable bills (regulatorily verifiable), and capital preservation (with interest during storage). If stablecoins can save time and money compared to traditional wire transfers, they have reason to replace them.
Second Path: Crypto Wild Faction
Another group is active in the on-chain ecosystem: first injecting stablecoins into decentralized exchanges, lending, derivatives, and other scenarios to form deep liquidity, then attracting wallet users and exchanges to join. Their primary value is not "cross-border remittance" but instant asset exchange, immediate collateralization, and free portfolio adjustment. Typical users include Non-Fungible Token players, quantitative institutions, and market makers - this group cares about coin usability and pool depth, not who holds the shares. To reassure users, they often publicly chain or distribute reserve funds, making "endorsement" transparent.
Third Path: Crossover Faction
Some teams try to break the binary opposition, attempting to build bridges between traditional finance and Web3. Theoretically, their logic seems reasonable: on one hand, using trust structures, audit reports, and bank accounts to meet regulatory compliance requirements and seek government licenses and institutional endorsements; on the other hand, building their own wallets, deploying contracts, participating in on-chain market-making, sending coins into the DeFi ecosystem to drive user activity through liquidity.
This "compliance + native" dual-track approach sounds beautiful and can even tell different stories to different investors - telling traditional funds they're a licensed stablecoin financial company, and telling Web3 funds they're the fastest-growing asset-anchored project in terms of Total Value Locked (TVL). The tricky part is that these two lines often conflict in operational logic: the compliance side emphasizes identifiable identity, traceable funds, and accountable customers; the on-chain side pursues low barriers, high efficiency, and open liquidity. This leads teams to often fall into a "wanting it all" state when designing products: Must users be verified? Must transactions be on-chain recorded? Can revenue accounts be reused? One choice leans towards regulation, another towards the market, neither daring to let go, ultimately resulting in mutual obstruction and burning money on both ends.
Stablecoin Projects Must Avoid Self-Indulgence
The core issue is not which route is right or wrong, but - who is actually using it? Which user groups are willing to pay for stablecoin convenience? Which scenario truly supports daily usage frequency?
What always determines whether a stablecoin can be migrated and used long-term is a simple arithmetic question of "who will pay".
If target customers already have low-fee, fast-arrival bank cards or third-party payment tools, they'll naturally be reluctant to switch - unless the new coin can create a visibly significant difference in speed, cost, or cross-currency conversion. But if we focus on those already on the margins of mainstream financial systems - like African independent developers selling $2.99 game skins and waiting five days for payment, or Vietnamese freelance illustrators receiving $300 monthly fees but losing $30 in transaction fees - the situation is entirely different. As long as stablecoins can reduce T+5 waiting to minutes and compress double-digit fees to single digits, they'll happily register another wallet and click confirm twice.
Therefore, for today's stablecoin projects to truly avoid the alliance chain's old path, the key issue is not about regulatory compliance or which chain they're on, but whether the product has a clear application path and scenario.
If this problem can't be solved, the most likely outcome is incurring high compliance costs to ultimately become an ecosystem "points coin" in various apps.
This is strikingly similar to the awkward situation of alliance chain projects.
A lesson from the alliance chain era was that projects were mostly led by technical lines, with business departments in a more collaborative state, and sometimes with low willingness to participate. People often overestimated "on-chain feasibility" while underestimating "off-chain usage willingness". In today's stablecoin projects, if this "weak business connection" status still exists, it will easily evolve into another "alliance chain" version.
Policy-driven can be an opportunity, but not everything. So, to all the giants vying in Hong Kong, the starting point of stablecoins should not be licenses, but business closed loops.
Truly viable projects are often initiated by business teams proposing usage needs, with compliance and technical departments collaborating to develop implementation paths. After all, the product itself is just a solution, not the goal. Perhaps what will truly race ahead is not another "universal wallet" stablecoin, but industry-specific stablecoins tailored for specific industrial chains.
We can imagine a cross-border e-commerce pipeline: the seller is in Shenzhen, the buyer in Mexico, with intermediaries like first-leg logistics, overseas warehouses, advertising placement, and local collection. The payment cycle jumps between 7 to 60 days, with dollars, pesos, and RMB mixed. If the stablecoin issuer first breaks down this cash flow into nodes - procurement, shipment, final payment, tax refund - and then embeds a "automatic allocation + tax marking" on-chain instruction for each node, then the coin becomes more than just a payment medium, but a receivable and credit certificate written into code. The seller cares about payment certainty, the logistics provider cares about lending costs, and regulators care about traceability. This industry stablecoin aligns these three demands in one go, hitting the pain point more precisely than a "generic digital Hong Kong dollar".
The same logic can be transplanted to overseas SaaS. SaaS companies fear cross-border accounts receivable accumulation: users pay by credit card, payment gateways first deduct 3%, acquiring banks deduct another 2%, and funds take two weeks to remit back home. If the platform directly splits subscription fees into "USDC in, industry coin out", subscription revenue can be locked into their wallet on the same day, while saving on foreign card transaction fees. Once the payment cycle shrinks from "T+14" to "T+0", the cash flow discount rate becomes the most straightforward market education.
Why do I repeatedly focus the lens on B2B rather than everyday C-end payments? Because the latter is a bloody red ocean.
Visa, Mastercard, and UnionPay have long built towering walls: merchant subsidies, risk models, fraud insurance, and settlement sharing. Without hundreds of millions of dollars in funding ammunition, you can't pry it open. Even if you subsidize transaction fees, once you stop "throwing money", users and merchants will immediately flow back to familiar card swiping and QR codes. Rather than burning money to educate consumers to scan an unfamiliar on-chain QR code, it's better to dig deep into long-tail needs where traditional finance finds things troublesome and low-margin - gradually eroding cross-border small payments under $1,000, supply chain financing with 1-3 day payment terms, and imperceptible transfers under 3% transaction fees.
Industry-specific stablecoins are not just changing logos or API interfaces, but truly writing payment terms, compliance reports, and risk control thresholds into smart contracts, allowing funds to complete a full "invoicing - collection - settlement - tax reporting" closed loop on-chain. Only when this closed loop makes enterprise CFOs feel "cheaper than banks, faster than third-party payments, and less hassle than intermediaries" can a stablecoin find its moat; otherwise, it remains just another digital token mocked by the market as "app points".
Summary
If one day, Hong Kong metro station self-service machines can directly top up Octopus cards with stablecoins, cross-border e-commerce receivables default to settling in Hong Kong dollar stablecoins, or a small overseas design company chooses to pay freelancers monthly with it, then stablecoins will have truly moved from policy pilot to commercial daily life.
A stablecoin's vitality is not in how many "compliance medals" it possesses, but whether it can be embedded in a self-consistent business chain, rotating for real transactions day after day. Hong Kong's new regulatory chapter merely opens the door. Whether it can truly cross over depends on who can merge capital flow, trade flow, and data flow on-chain, then safely and orderly return to everyday economy - only then will it have truly transitioned from "policy dividend" to "financial infrastructure".
