Stablecoin Strategy: China and US Diverge as Hong Kong Prepares Licenses
Key Takeaways
- Industry leaders Gary Liu and Liu Xiaochun analyze the evolving role of stablecoins as the 'plumbing' of digital finance.
- As Hong Kong prepares to issue its first batch of stablecoin licenses, the dialogue highlights a strategic shift in how China and the US approach blockchain-based fiat equivalents.
Mentioned
Key Intelligence
Key Facts
- 1Stablecoins currently serve as 'plumbing' for 90% of all crypto and digital asset finance transactions.
- 2Hong Kong is expected to issue its first batch of stablecoin licenses in the first half of 2026.
- 3Derivative trading is identified as the primary 'killer use case' for current blockchain technology.
- 4Gary Liu, former SCMP CEO, now leads Terminal 3 and chairs the Web3 Harbour industry association.
- 5Professor Liu Xiaochun represents high-level Chinese financial think tanks including SAIF and the Shanghai Finance Institute.
Who's Affected
Analysis
The global financial landscape is witnessing a fundamental shift in the utility of stablecoins, moving from speculative assets to the essential 'plumbing' of the digital economy. In a recent high-level dialogue hosted by the South China Morning Post, Gary Liu, CEO of Terminal 3 and chair of Web3 Harbour, and Professor Liu Xiaochun of the Shanghai Advanced Institute of Finance (SAIF), provided a comprehensive look at how these digital assets are reshaping international finance. The discussion comes at a critical juncture as Hong Kong nears the issuance of its first official stablecoin licenses, a move that signals a sophisticated regulatory evolution in the region.
Gary Liu's assessment of the current market reveals that stablecoins are almost exclusively utilized for the internal mechanics of crypto and digital asset finance. Specifically, approximately 90 percent of stablecoin volume is tied to what he describes as 'plumbing'—the necessary pairing of assets to facilitate decentralized finance (DeFi) transactions. This technical utility is currently anchored by derivative trading, which Liu identifies as the 'killer use case' for blockchain technology. The ability to compose different tradeable assets on-chain requires a stable medium of exchange, a role that stablecoins have filled with increasing efficiency despite regulatory headwinds in various jurisdictions.
The discussion comes at a critical juncture as Hong Kong nears the issuance of its first official stablecoin licenses, a move that signals a sophisticated regulatory evolution in the region.
From a strategic perspective, the divergence between the United States and China remains a focal point for market analysts. While the US has largely allowed market-driven stablecoins (predominantly pegged to the US Dollar) to dominate the global liquidity pool, China has maintained a more controlled approach, focusing on its Central Bank Digital Currency (e-CNY). However, the role of Hong Kong is emerging as a vital 'middle ground' or sandbox. By issuing stablecoin licenses, Hong Kong is positioning itself as a regulated gateway that allows for the integration of blockchain-based finance with traditional fiat systems, potentially offering China a way to participate in the global stablecoin ecosystem without compromising its internal capital controls.
What to Watch
Professor Liu Xiaochun’s perspective from the Shanghai Advanced Institute of Finance underscores the academic and institutional interest in how these technologies impact monetary policy and financial stability. The involvement of institutions like the China Academy of Financial Research and the Shanghai Finance Institute suggests that the Chinese financial establishment is closely monitoring the 'strategic importance' of stablecoins beyond simple payment processing. The debate now centers on whether stablecoins will remain confined to the crypto-native 'plumbing' or if they will eventually disrupt traditional cross-border payments and trade settlement.
Looking forward, the issuance of licenses in Hong Kong will likely serve as a bellwether for the industry. If successful, it could provide a blueprint for other jurisdictions seeking to balance innovation with financial security. For investors and financial institutions, the transition of stablecoins from the fringes of finance to a regulated, institutional-grade infrastructure component represents a significant maturation of the asset class. The market should watch for the specific entities that receive these initial Hong Kong licenses, as they will become the primary conduits for institutional capital entering the Web3 space in Asia. The long-term implication is a bifurcated stablecoin market: one side driven by the existing USD-pegged dominance and the other by a new wave of regulated, multi-currency or CNY-adjacent tokens emerging from the Hong Kong framework.
How we covered this story
Every story in our finance coverage is assembled from multiple primary sources, cross-referenced for factual consistency, and scored along three independent dimensions: sentiment, operational impact, and source-cluster confidence. Single-source rumors and unverifiable claims do not pass our editorial gate. When a story shows "Verified by N sources" with N≥2, the development is independently corroborated; when N=1, we mark it explicitly so readers can weigh the signal accordingly.
Impact scoring uses a 1-10 scale weighted toward regulatory, financial, and operational consequence rather than coverage volume. A topic that runs in every outlet but moves no real decisions ranks lower than a niche regulatory filing that reshapes how operators in the finance space have to behave. Read our full methodology for the scoring rubric, our glossary for term definitions, and our trends index for the longitudinal view across the beat.
| Signal on this page | What it tells you |
|---|---|
| Verified by N sources | Independent corroboration count. N≥2 is our confidence floor; N=1 is marked explicitly. |
| Impact score (1-10) | Regulatory + financial + operational weight. 8+ signals an experienced-operator action item. |
| Sentiment | Five-tier classification trained on labeled finance-specific corpora. |
| Timeline | Where applicable, the related-events sequence that contextualizes today's development. |