The Web3 Carnival was a resounding success, but why is the cryptocurrency world still "absent" from stablecoins?

The Web3 Carnival just concluded successfully yesterday at the Hong Kong Convention and Exhibition Centre. Compared to the diverse array of new concepts and narratives—AI x Crypto, RWA, smart hardware, Ethereum applications, and innovative quantum computing upgrade solutions—a comment from the VDX CEO left a deeper impression on our team: "Every time I catch up with friends in the crypto world, there's nothing new to say; everything's happening between financial institutions now." In contrast to the Carnival's grand scale, the Hong Kong Monetary Authority's official issuance of the first batch of stablecoin issuer licenses on April 10th marks a new and highly standardized phase in the regulation of digital assets in Hong Kong and even Asia. Out of a total of thirty-six applications, only HSBC and Idolpoint Financial Technology Co., Ltd. ultimately stood out and were granted entry. A staggering 94% elimination rate clearly conveys the core principle of regulators: "stability first, zero tolerance for risk." This result is less a sign of free market competition and more a result of a meticulously designed institutional selection process—the weighting of financial innovation and risk control by Hong Kong regulators speaks for itself. Today, our team will discuss why the Web3 industry hasn't entered the stablecoin arena. Institutional Framework and Initial Results: The Regulatory Logic Behind a "Strict Selection" As we analyzed before, Hong Kong's stablecoin regulation follows the principle of "same activity, same risk, same regulation." Hong Kong Financial Secretary Paul Chan Mo-po also emphasized in his opening speech at the carnival that decentralization and digitalization do not mean lowering regulatory standards; on the contrary, they should promote more effective compliance and supervision to ensure that AI is predictable, traceable, and controllable by humans. A rigorous compliance project is being gradually built. The core is the Stablecoin Ordinance, which will come into effect in 2025. Specifically, the high regulatory threshold is reflected in several hard dimensions. First, there are extremely high capital and reserve requirements. Applicants must have a paid-in capital of no less than HK$25 million, and the issued stablecoin must be 100% backed by high-quality liquid assets such as cash, bank deposits, and short-term government bonds, with independent custody and monthly third-party audits. Second, there are zero-tolerance risk control and compliance standards. The review focuses heavily on anti-money laundering, counter-terrorism financing, customer asset protection, extreme market stress testing, and a redemption mechanism that ensures completion within one business day. Finally, regulators explicitly prohibit algorithmic stablecoin models, allowing only fiat-backed stablecoins, thus eliminating the risk of "de-anchoring" due to fluctuations in collateral value or flaws in mechanism design. Under these stringent selection criteria, the approval of HSBC and Dingdian Financial is no longer accidental, but an inevitable result of regulatory logic. Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), explicitly stated that the core consideration in the approval process is whether the applicant possesses "sufficient risk management capabilities and a concrete application plan." In other words, in issuing the first batch of licenses, regulators prioritized not the disruptive nature of the technology or the market's potential, but rather the institution's stability, risk controllability, and the close connection between its business and the real economy. This positioning directly elevates stablecoins from the category of "crypto asset speculation tools" to the level of "financial infrastructure." The core attributes of infrastructure are security, stability, and trustworthiness—precisely the core capital accumulated by traditional financial giants over a century of refinement. Winner Profile: Why Did "Banking Affiliates" Dominate the Start? Analyzing the backgrounds of the two licensed institutions reveals a common core characteristic: a strong traditional financial lineage and robust comprehensive credit backing. This is no coincidence, but rather a direct manifestation of regulatory intent. 1. HSBC Bank The Hongkong and Shanghai Banking Corporation Limited (HSBC), as one of Hong Kong's three note-issuing banks, is itself a crucial component of the Hong Kong dollar credit system. It boasts top-tier international credit ratings, a trillion-dollar balance sheet, a mature global cross-border payment and settlement network, and a proven anti-money laundering and risk management system. For regulators, having HSBC issue stablecoins is equivalent to directly grafting new products onto the most solid existing financial credit foundation, minimizing public concerns about the issuer's solvency. Its business plan is also highly pragmatic: the Hong Kong dollar stablecoin, planned for launch in the second half of 2026, will be seamlessly integrated into its PayMe payment wallet, which already has over 3.3 million users, and HSBC Hong Kong's mobile banking application. This means that stablecoins are not being cultivated from scratch to foster user habits, but rather are a functional extension of the existing vast retail financial ecosystem. Initially, it focuses on everyday scenarios such as peer-to-peer transfers and personal-to-merchant payments, achieving a closed-loop cycle of "issuance-circulation-application." This path, relying on the existing ecosystem and serving real-world transactions, has the lowest risk and the strongest controllability. 2. Idol Financial Technology Co., Ltd. represents another "hybrid advantage" model. Its shareholding structure is key to understanding its approval: Standard Chartered Bank (Hong Kong) Limited (50.5% controlling stake), Hong Kong Telecom, and Animoca Brands. This combination represents a fusion of "financial compliance + telecommunications channels + Web3 ecosystem." Standard Chartered Bank, as another note-issuing bank in Hong Kong, provides a bank-level compliance foundation, capital custody, and risk control capabilities on par with HSBC; Hong Kong Telecom, through its "Pay-to-Win" payment tools, brings a vast local offline merchant network and C-end user reach. Animoca Brands, as a well-known Web3 investment and development group, contributes its understanding and connectivity capabilities within the blockchain ecosystem. The "B2B2C" business model chosen by Dingdian, which reaches users through authorized distributors and focuses on tokenized real-world asset settlement and cross-border payment solutions, indicates that its strategy is not to directly compete with HSBC in the red ocean of retail payments, but rather to build a financial settlement layer serving institutions and specific ecosystems. Regulatory approval of this architecture can be seen as a cautious tolerance for scenario innovation and ecosystem cooperation while adhering to the bottom line of "bank-led" development. The success of these two institutions points to a common conclusion: In the initial stage of stablecoin development, Hong Kong regulators prioritized "credit" and "controllability" over "innovation" and "openness." The long-term accumulated capital strength, compliance culture, regulatory communication channels, and public trust of the banking system constitute a moat that cannot be surpassed by technological advantages in the short term. This essentially confines the issuance of stablecoins to the core of the existing financial power structure. The Web3 "Table" Dilemma: Compliance Gap and Policy Constraints In stark contrast to the successful "table entry" of two traditional financial institutions, the collective absence of numerous Web3 native companies and tech giants is striking. Ant Group, JD Technology, and HashKey, among other previously high-profile applicants, did not appear in the initial list. This result directly reflects the systemic dilemma faced by the Web3 industry under the current stringent Hong Kong regulatory framework. The primary dilemma lies in the structural gap in compliance capabilities. The "decentralization," "anonymity," and "open finance" often touted in the Web3 concept fundamentally conflict with current regulatory requirements. The Stablecoin Regulations require strict customer identification and due diligence comparable to banks, making it virtually impossible for DeFi applications relying on anonymous wallets or aiming to reduce intermediaries to operate compliantly under the current framework. Regulators require stablecoin issuers to have robust transaction monitoring systems, clear fund custody chains, and redemption guarantees to cope with runs. These represent extremely high operational and cost barriers for many Web3 startups with flat organizational structures and novel asset custody methods. Regulators are scrutinizing auditable, traceable, and accountable centralized governance capabilities, which are precisely what many Web3 projects intentionally downplay or technically circumvent. Secondly, the transmission effect of mainland policies constitutes an invisible barrier. According to public reports, mainland regulators, out of consideration for maintaining monetary sovereignty and financial stability, have adopted a cautious attitude towards domestic companies participating in overseas stablecoin businesses, and have even provided "window guidance." This constitutes an insurmountable policy constraint for technology companies whose shareholder background or business is closely related to the mainland market. Although Hong Kong enjoys a unique financial status under the "one country, two systems" principle, it must fully consider the overall financial security and regulatory direction of the country on major issues involving cross-border capital flows and potential risks of currency substitution. Therefore, even if these technology companies possess strength in technology, capital, and application scenarios, their applications may be hindered because they cannot fully demonstrate their compatibility with mainland regulatory policies. At a deeper level, this is a clash between development path and regulation. The Web3 industry originated from a grassroots innovation culture of "code is law" and "rapid iteration and willingness to try and fail." Financial regulation, especially regulation involving monetary payment functions, is philosophically based on the principles of "law above code" and "risk prevention and rights protection." Hong Kong's top-down approach of "establishing strict laws first, then issuing licenses," unlike the more lenient "sandbox-first" model in places like Singapore, means that only those "plugs" that can fully adapt to the existing regulatory "sockets" can be connected. For many Web3 companies, their business models themselves represent a challenge to the old "socket" standards. Transforming themselves to fully comply with stringent bank-level standards is not only extremely costly but may even undermine their core innovative value. Therefore, the failure of the Web3 industry to be among the first to "play the game" is not due to a single factor, but rather a comprehensive result of the interplay of compliance capabilities, the overall policy environment, and development methodologies. This demonstrates that in the field of stablecoins, considered digital financial infrastructure, pure "technological advantages" or "ecological vitality" are insufficient to open the regulatory door. A deep understanding, respect for, and integration into the traditional financial regulatory system are the scarce resources at this stage. The impact on ordinary people: convenience and boundaries coexist. The implementation of compliant stablecoins will gradually but tangibly change the financial lives of ordinary Hong Kong residents and even mainland investors interested in this market. Its impact is specific and subtle, while its boundaries are clearly defined. The positive impact is mainly reflected in the improvement of payment efficiency and financial accessibility. For Hong Kong residents, stablecoins first and foremost provide a new digital payment option. HSBC's integration of stablecoins into PayMe's scenario planning means that users may be able to achieve instant, low-cost peer-to-peer transfers based on stablecoins, as well as direct payments to participating merchants in the future. This is not intended to replace existing FPS or e-wallets, but rather to provide an additional, potentially more convenient option, especially when interacting with on-chain assets. For individuals and small merchants with cross-border needs, stablecoins can theoretically provide a faster and lower-cost cross-border payment solution than traditional wire transfers. Standard Chartered's example of shortening cross-border settlement from "T+3" to near real-time reflects this vision. However, ordinary people must be aware of the boundaries and risks involved. First, stablecoins themselves are not deposits and do not generate interest; their value depends entirely on the issuer's sufficient, high-quality reserve assets as collateral and their own creditworthiness. Despite regulation, "compliance" does not equate to "zero risk." Custodian risk and liquidity risk under extreme market conditions still exist. Secondly, the expansion of application scenarios will be gradual and controlled. Regulators explicitly prohibit over-the-counter (OTC) exchanges from offering stablecoins to the public, significantly limiting their ease of offline circulation. In the short term, the main applications of stablecoins will be limited to the ecosystem of licensed institutions or specific scenarios in which they cooperate, making it difficult to circulate freely like cash or ordinary deposits. Finally, regarding investment functions, stablecoins are merely pricing and settlement tools. Investing in tokenized assets with them still carries the risk of market volatility in the underlying assets; it is by no means a guaranteed profit. Binance Co-CEO He Yi also advises industry practitioners to allocate to leading assets and adhere to the principle of rational investment. The Question of "Purchasing" by Mainland Residents: Double Separation of Law and Policy A highly concerned question is: Can mainland residents directly purchase and hold these compliant stablecoins issued in Hong Kong? Analysis from the current legal and policy framework shows that the answer is no, and there are multiple layers of separation.First, the foreign exchange management system constitutes the first line of defense. According to Article 17 of the "Regulations of the People's Republic of China on Foreign Exchange Control," domestic institutions and individuals engaging in the issuance and trading of overseas securities must register as required, and if approval or filing with the competent authority is required, it must be completed before foreign exchange registration. While compliant stablecoins are not traditional securities, as financial instruments issued overseas and denominated in Hong Kong dollars, their trading involves the exchange of RMB and HKD and cross-border capital flows, naturally falling under the scope of foreign exchange control. Currently, there are no compliant foreign exchange and cross-border remittance channels for mainland residents to directly purchase overseas stablecoins. Normal cross-border remittances made by individuals through the banking system are subject to clear purpose review, and are generally not permitted for the purchase of virtual currencies or related products. Secondly, **mainland China's regulatory policies on virtual currencies and related businesses are clear and strict.** Mainland regulatory authorities have repeatedly stated that virtual currency-related business activities are illegal financial activities. Although Hong Kong's stablecoins are defined as "compliant," their technological essence is still based on blockchain, and under the mainland regulatory context, their connection with virtual currencies is difficult to sever. Domestic financial institutions and payment institutions are not allowed to provide services for any virtual currency transactions. Therefore, attempting to directly purchase stablecoins from licensed Hong Kong institutions through mainland bank accounts will trigger anti-money laundering monitoring and compliance interception at the operational level. Furthermore, the compliance requirements of Hong Kong licensed institutions themselves will also block proactive sales to mainland residents. According to Article 18 of the "Pilot Measures for the Settlement of RMB for Overseas Direct Investment," banks must fulfill anti-money laundering obligations and assess destination risks when handling relevant cross-border business. For institutions like Dingdian Financial, their CEO has clearly stated that they will only conduct business in a well-regulated and compliant ecosystem. Given the clear regulatory stance of the mainland, any licensed institution that proactively promotes or sells stablecoins to mainland residents will face significant compliance risks, potentially even affecting its license status. Therefore, they will inevitably establish strict geofencing and customer identification mechanisms to exclude mainland residents from their service scope. So, are mainland investors completely unable to participate? The answer is no, but the path is indirect. As the material states, the market provides channels to indirectly share in the industry's growth dividends by investing in related brokerage stocks, fintech ETFs, and other securities products. This falls under the category of securities investment activities conducted within mainland China or through legal channels such as the Stock Connect program, and is legally completely different from directly holding and trading stablecoins. For mainland residents, understanding and adhering to this boundary is crucial. Any attempt to purchase stablecoins across borders through underground channels or disguised trade not only poses no guarantee of fund security but may also violate relevant national foreign exchange management and anti-money laundering laws and regulations, facing the dual risks of financial loss and legal sanctions. In conclusion, the issuance of the first batch of stablecoin licenses in Hong Kong establishes a starting model dominated by traditional finance with absolutely controllable risks. The victory of HSBC and IDP represents the regulators' ultimate vote on the integration of credit, capital, and real-world scenarios. The temporary absence of Web3 forces highlights the profound gap that still needs to be bridged between innovative passion and regulatory rationality in the field of financial infrastructure. For ordinary people, stablecoins will bring limited but tangible convenience, along with the essential lesson of understanding the risks of new financial products. For mainland residents, clear legal boundaries have been drawn; holding stablecoins is not illegal, but direct purchase may face obstacles. As for when Web3 will truly "take the table," perhaps when the next carnival opens and the first batch of licensed institutions' stablecoins are officially launched, the regulatory framework will undergo another round of adjustments. Like everyone else, the Sa Jie team is waiting to see.