Dialogue with Xiao Feng: A Cool Reflection on the Hong Kong Stablecoin Boom

Key Points Summary

• Hong Kong's regulation of stablecoins is unexpectedly strict, mainly focusing on anti-money laundering.

• The mainland may start by accepting stablecoins and gradually accept the entire cryptocurrency ecosystem.

• Stablecoins on consortium blockchains are unlikely to succeed; permissionless is the key to blockchain development.

• Hong Kong may once again become the world's center for digital asset trading.

• Singapore is positioned as the Switzerland of Asia, while Hong Kong is positioned as the Wall Street of Asia.

• Next year could be a period of rapid growth for traditional finance embracing cryptocurrency.

• The underlying protocol of blockchain should be decentralized, but the application layer must be centralized.

Hong Kong's attitude towards stablecoin regulation is cautious

Officials from the Hong Kong Monetary Authority remind that the stablecoin sector is overheated, and initial licensing and regulation will be very strict, particularly concerning anti-money laundering aspects. Although there are many rumors in the market about companies applying, the number of applications that will actually be accepted will be very few.

As an international financial center, Hong Kong pays special attention to anti-money laundering loopholes. Unlike the mainland, which views stablecoins more from a monetary perspective and the lens of major power competition, Hong Kong is more concerned about the anti-money laundering issues that may arise from regulatory gaps.

The Attitude of the Mainland is Gradually Changing

The mainland may start by accepting stablecoins and gradually accept the entire cryptocurrency ecosystem. Recent discussions in Beijing indicate:

1. In the face of the global wave of cryptocurrency legislation, China cannot continue to turn a blind eye.

2. How to respond to what has been reached as a consensus, but the specific methods are still under discussion.

3. If we do not embrace these new things, we may be at a disadvantage in the competition of national currencies.

4. After accepting stablecoins, it is essential to accept public chains; otherwise, stablecoins will lack global competitiveness.

5. In the future, it may successively accept RWA( real-world assets), Bitcoin, etc.

Alliance chain stablecoins are difficult to succeed

It is difficult for stablecoins on consortium chains to succeed, the main reasons are:

1. Usage requires application and permission, promotion is difficult.

2. The review process is cumbersome and inefficient.

3. Permissionless is an important feature of blockchain, and successful applications often arise in a permissionless state.

4. Consortium chains lack openness, making it difficult to attract enough users.

The Possibility of Hong Kong Becoming a Digital Asset Hub

Hong Kong is expected to become a world center for digital asset trading again, with advantages including:

1. China and the United States are the main competitors in the global cryptocurrency market, and Hong Kong can leverage China's advantages.

2. The common law system under "one country, two systems" provides Hong Kong with a unique advantage.

3. The emergence of DeepSeek has enhanced the valuation of Chinese assets.

4. Changes in U.S. policy have led to a reallocation of funds, with some flowing to Hong Kong.

5. Hong Kong is positioned as the Wall Street of Asia, making the market more active.

The Trend of Traditional Finance Embracing Cryptocurrency

The proportion of traditional financial institutions embracing cryptocurrency is increasing:

1. U.S. legislation provides legitimacy for the industry and alleviates compliance concerns.

2. It is expected to enter a period of explosive growth next year.

3. U.S. legislation will impact the world, and other countries may follow.

4. Hong Kong, as an international financial center, will closely follow these changes.

The Balance between Decentralization and Centralization in Blockchain

1. The underlying protocol must be decentralized to ensure fairness.

2. The application layer requires a certain degree of centralization to improve efficiency.

3. Most commercial applications should seek a balance between fairness and efficiency.

4. A 100% decentralized application is unrealistic; it needs to progress within paradoxes.