Suppose that stablecoins can be used to buy insurance in Hong Kong after August.

On August 1st, Hong Kong's stablecoin policy officially entered its "public testing" phase. Those in the know understand the depth of the intricacies here. The following content is all hypothetical, all fantasy.

It's 2025, and we should allow everything to happen.

Hypothetically, if we fast-forward a few years, the stablecoin market (primarily based on the U.S. dollar and U.S. bonds) is functioning normally, with millions of safe havens and a world of happy dollars.

Hypothetically, whether it's the current major players like USDC/USDT or the emerging dollar stablecoins from Dubai Financial Park, Myeongdong Korean BBQ, Kenyan coffee, or Tsim Sha Tsui rice noodle rolls, we assume that everyone has 1:1 dollar collateral with no hidden leverage or fraud, and all parties mutually recognize each other's stablecoins as legally compliant and sufficiently liquid.

Based on such an optimistic expectation, is it possible that Hong Kong's insurance market, which attracted nearly HKD 100 billion in new premiums in the first half of this year, could also accept stablecoin settlements?

Currently, the minimum "paid-up capital" requirement for applying for a stablecoin license is HKD 25 million (along with other compliance requirements), an amount that might not even cover the first-year premium of a single high-net-worth client. For insurance companies with net assets generally in the hundreds of billions and top players in the trillions, obtaining a stablecoin license in the future seems a reasonable assumption, doesn't it?

If this were to happen, we could reasonably deduce the following usage scenarios:

As a high-net-worth client, you no longer need to make a trip to Hong Kong to open a bank account. While in Hong Kong, simply transfer stablecoins from your trust-structured cold wallet to the insurance company's compliant payment address to complete the first-year premium payment.
The insurance contract and future withdrawal accounts are automatically registered on the blockchain, enabling smart contracts to handle withdrawals, claims, or even transferring proceeds to a trust address for future generations once specific conditions are met.
In the future, you could also use this insurance policy as collateral for loans in the on-chain financial market.
Not to mention, premium financing projects (borrowing money to leverage savings insurance policies), which currently take half a day at the bank, could be completed in 10 minutes—essentially what DeFi has been doing since 2020.
As a necessity-driven client, the payout from the Hong Kong critical illness insurance you bought 10 years ago, which could only be deposited into a Hong Kong bank account, can now be transferred via FPS to a stablecoin-supported VISA card linked to WeChat Pay, allowing for large payments at domestic hospitals in under five minutes with just facial recognition. Even if WeChat charges a small credit card fee, clients would be willing.
As the crypto world and traditional financial markets begin to irreversibly merge, the U.S. stock indices passively invested in by insurance companies are already indirectly investing in the digital currency world. In the future, even the Hang Seng Index and Stock Connect might include digital currency shares (if the Crypto Treasury plans of certain Hong Kong-listed companies succeed). Not just Hong Kong or international insurers, but even the underlying assets of your RMB social and medical insurance will passively and indirectly allocate to digital currencies, even if it's just 0.00001%.
Moreover, given BTC and ETH's historically high annualized returns (boosted by early explosive growth), while past performance doesn't guarantee future results, the asset management industry shows that even a 0.1% allocation to BTC or ETH in backtests significantly improves overall portfolio returns. Thus, future participating policies, by allocating to top digital assets, might find achieving a 6.5% annualized compound return optimistic but not impossible with effort.
Those familiar with the insurance industry know that insurers operate on the law of large numbers and long-term arbitrage. Future premium potential is tied to birth rates, mortality rates, and young labor demographics. The next blue ocean for insurance is likely Africa and South America, where local currencies are the least stable—making stablecoins and insurance ideal for these markets.

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Alright, time to wake up—none of the above will happen immediately in 2025. Hong Kong is still in the sandbox testing phase, requiring real-name registration for both buyers and sellers, with only a select few participating as beta testers. For example, Hong Kong's stablecoin stage is akin to the carbon emissions trading market talked about for over a decade. (Just an analogy, don’t get upset.)

I'm not the only one dreaming. Balaji's fantasies are even wilder, fast-forwarding to Everything on Chain, where even smart locks are on the blockchain—a narrative last seen in 2017 Chinese crypto WeChat groups.

The Hong Kong government is moving cautiously, step by step, with sandbox testing—necessary because risks persist. The LUNA/UST debacle is a cautionary tale, and putting assets on-chain exposes ordinary users to the most ruthless hackers. Financial institutions as gatekeepers have their own fat-finger mishaps, where small oversights can lead to billions lost, leaving users clueless about how their money vanished.

But after several cycles, I know risks and opportunities won’t unfold as neatly as expected. The future can't be predicted accurately but can be felt unevenly. Yet, time and again, pessimists may occasionally be right, but optimists end up on yachts. Here's hoping to see fellow pioneers aboard in Hong Kong's waters.

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Glossary:

What is a stablecoin?

The future is here. USDT/USDC have survived multiple crypto cycles. With the U.S. GENIUS Act passed and Hong Kong's stablecoin sandbox testing starting August 1, more companies will issue on-chain currencies—though issuance doesn’t guarantee usage or stability. History shows cases of disuse and instability (failing 1:1 dollar pegs).

Use cases for stablecoins?

Many are discussing RWA (Real World Asset) adoption, given last year’s trend of WeChat names flaunting web3/NFT/metaverse/RWA. RWA breaks down traditionally illiquid asset bundles (recall "The Big Short" on subprime loans) into on-chain tradable units via SPVs and issuers, sold to crypto degens who once traded UST/LUNA and monkey JPEGs. And like subprime, on-chain assets can be rehypothecated and remixed.

Cold Wallet

Some store crypto on exchanges, others in wallet apps, but true OGs keep coins in an offline, internet-disabled device—a cold wallet. Usually a USB-sized hardware unit, it’s hacker-proof but risks getting lost by its owner.

Smart Contract

Blockchain’s "auto-executing contracts"—once conditions are met, no one can stop them. Example: If you die (triggered by death certificates, heartbeat cessation), your policy auto-pays your wife’s wallet. Or, if the address has a typo, it might pay someone else’s wife.

DeFi (Decentralized Finance)

If traditional finance is "go to the bank, queue, sign papers," DeFi is "interact with code, borrow/repay in seconds." Want a loan? Pledge crypto, get funds instantly. Arbitrage? Algorithmic hedging in minutes. Flee? Well, the chain remembers—if you truly understand the game (and many don’t).

Crypto Treasury

Some firms swap cash reserves for BTC/ETH, betting on long-term gains. Michael Saylor’s MSTR is the poster child, converting all corporate cash into BTC—now the largest corporate BTC holder, leveraging stocks to buy more. With BTC nearing $120K, he’s sitting on paper gains. If enough Hong Kong-listed firms follow, Hang Seng Index or Stock Connect holdings could include BTC—sounds like a joke, but possible.

Stablecoin/crypto-related firms: $MOON INC(01723.HK) $Circle(CRCL.US) $ZA ONLINE(06060.HK) $OSL GROUP(00863.HK) $YUNFENG FIN(00376.HK) $LIANLIAN(02598.HK) $BRIGHT SMART(01428.HK)

Insurers: $AIA(01299.HK) $CPIC(02601.HK) $FWD(01828.HK) $NCI(01336.HK) $PING AN(02318.HK) $PRU(02378.HK) $CHINA LIFE(02628.HK)