Professor Xiang Fang, Professor Yang Liu, Professor Haonan Zhou
20 May 2026
In April 2026, the Hong Kong Monetary Authority (HKMA) granted the first batch of stablecoin issuer licences to The Hongkong and Shanghai Banking Corporation Limited (HSBC) and Anchorpoint Financial Limited (Anchorpoint). HSBC is one of Hong Kong’s largest banks and also holds the special status of a note-issuing bank. Anchorpoint was established as a joint venture by Standard Chartered Bank, Animoca Brands Limited, and HKT Limited, with Standard Chartered as the controlling shareholder.
Issuers helping to build a resilient digital asset ecosystem
Granting the first stablecoin issuer licences to traditional commercial banks shows that Hong Kong is exploring a new model for stablecoin development. The issuers of the world’s two dominant US dollar stablecoins―USDC and USDT―are not banks. Their use cases are concentrated in virtual asset trading and cross-border payments, placing them in competition with traditional banks. Policymakers have therefore remained concerned that the expansion of stablecoins could lead to financial disintermediation, undermine the competitiveness of the banking sector, and amplify financial risks. On the positive side, many market participants expect stablecoins to exert competitive pressure on the bank-centred payment system to upgrade its technology, enhance efficiency, and reduce transaction costs.
Having obtained the permission to issue stablecoins, HSBC and Anchorpoint should develop the technological infrastructure required for asset tokenization and virtual payments, enabling stablecoins to circulate on-chain. This infrastructure can be used for stablecoin payment, settlement, and clearing, while also generating synergies that help drive changes in traditional banking business models at lower cost. It can further support traditional banking activities such as tokenized deposits and loans, thereby facilitating technological advancement and efficiency gains.
Integrated development based on complementary strengths
Stablecoin issuance in Hong Kong has, right from the outset, been focused on integrating digital finance with traditional commercial banking. Some market participants have argued that the HKSAR Government has been too conservative in granting stablecoin licences, failing to meet the needs of digital finance and instead confining stablecoin development within the traditional banking settlement and payment system. In our view, however, this perspective overlooks the advantages arising from the synergies between stablecoin issuance and the tokenization of banking business.
First, the central bank–commercial banking system has been in operation for over a century. Underpinned by deposit insurance, the regulatory system is reinforced by such instruments as capital adequacy ratios and liquidity coverage ratios. Having weathered multiple economic and financial crises, it has proved relatively effective in addressing risks and maintaining financial stability.
As a new payment instrument, stablecoins remain at an early stage of practical application. Whether the regulatory framework can effectively respond to potential crises remains to be tested over time. Therefore, the tokenization of commercial bank deposits and loans, which can simultaneously meet the dual objectives of improving payment efficiency and maintaining financial stability, represents a more prudent option. Unlike the US model, where stablecoins exert external competitive pressure on banks, Hong Kong’s approach treats the stablecoin issuer licence as an opportunity for banks to boost efficiency on their own initiative.
Second, issuance by commercial banks is conducive to enhancing the safety of stablecoins. Maintaining value stability requires, above all, sufficient reserve assets with high liquidity and low risk. In the decade or more since the global financial crisis, liquidity risk in the banking sector has declined significantly. HSBC, for example, has a liquidity coverage ratio of approximately 160%, far above both the international average and regulatory minimum. Its accumulated high-quality liquid assets would help ensure the safety of stablecoin issuance at the initial stage.
At the same time, even reserve assets with the highest levels of liquidity and safety can experience price fluctuations. If market confidence is shaken as a result, stablecoin issuers may still face run risk. The ability of a stablecoin issuer to generate sustained profits from its issuance business, i.e. its “franchise value”, plays an important role in enabling it to withstand run risk. The two banks mentioned above have long histories, large customer bases, and stable profitability. The franchise value they have accumulated through economies of scale is far higher than that of issuers that are not traditional financial institutions. In particular, when faced with the risk of a stablecoin run, they can proactively inject capital to avert a liquidity crisis.
Finally, a major challenge in the development of stablecoins is compliance, namely how to verify customers’ identities and prevent stablecoins from becoming a breeding ground for illicit transactions. By comparison, financial institutions such as commercial banks have extensive compliance experience and are able to complete verification procedures efficiently and accurately, uphold the legality of stablecoin transactions, and respond effectively to regulatory requirements.
Assessment of the trade-offs
International opinion is divided on the prospects of stablecoins, with the most representative negative view coming from the 2025 Annual Economic Report of the Bank for International Settlements (BIS). According to the BIS, money must satisfy three conditions in order to function as a general means of payment. The first is “singleness”, meaning that users widely recognize the value of the money and do not need to question or verify the underlying assets and issuance logic behind it. The second is “elasticity”, in the sense that the money can readily meet demand for large-value payments without generating financial risks. The third is “integrity”, which means that the money can effectively prevent illicit financial transactions. The BIS argues that stablecoins have so far failed to meet these requirements and therefore cannot be widely accepted.
Assessed against the BIS framework, Hong Kong’s new model for stablecoin development can be seen as explicitly addressing these three shortcomings. With large traditional banks as stablecoin issuers, the issuers’ franchise value keeps their run risk low, meaning that the requirement of monetary singleness is largely satisfied. These stablecoins also follow the principle of full reserves, which reduces payment risk. Even if fluctuations in reserve-asset prices create risks, the financial institutions acting as issuers can use their banking systems to inject liquidity, thus better satisfying the requirement of “elasticity”. Financial institutions with extensive compliance experience can also conduct customer identity verification to the greatest possible extent, thereby ensuring the “integrity” of transactions.
Nevertheless, some argue that the parallel development of stablecoins and tokenized banking could weaken the importance of stablecoins in virtual finance. What purpose would stablecoins still serve if bank deposits and loans can be traded, used for payments, and settled on-chain?
In fact, even if the tokenization of bank deposits and loans becomes highly advanced, the role of stablecoins in the financial ecosystem will remain irreplaceable. The fundamental difference between stablecoins and banks’ deposit-taking and lending activities lies in the fact that stablecoins are fully reserved, with each unit issued backed by one unit of reserve assets. By contrast, bank deposits and loans are fractionally backed. The amount of base money supporting each unit of bank deposits and loans is far less than one unit, with the ratio between bank money and base money known as the “money multiplier”. Banks create credit through the money multiplier, which in turn makes bank runs an inherent risk of the banking system.
The outlook for on-chain finance
On-chain asset trading is robust and accounts for the majority of virtual financial activity. These assets are characterized by high returns, high risks, and sharp price volatility. If investors use tokenized bank deposits to invest in on-chain assets, a decline in asset values could trigger margin calls, forcing investors to withdraw funds and creating run risk. Under the money multiplier mechanism, even well-managed banks can be extremely vulnerable to bank runs if depositors simultaneously seek to redeem or withdraw their deposits.
The high risk of on-chain assets makes it difficult for tokenized bank deposits to satisfy the strong trading demand of on-chain users. When dealing with high-risk, highly volatile on-chain assets, the use of fully reserved stablecoins instead of tokenized bank deposits can accommodate redemption demand arising from sharp price fluctuations without posing additional risks. Therefore, even in a financial ecosystem where on-chain deposits, lending, and asset trading are dominated by banks, it is still essential to maintain a separation between tokenized banking and on-chain financial-asset trading. Under such a separation, stablecoins will remain an important instrument for the trading, settlement, and clearing of on-chain financial assets.
The granting of stablecoin issuer licences to two major commercial banks shows that Hong Kong is moving towards the world of on-chain finance anchored by financial intermediaries. This represents a more prudent approach as it can contain financial risks while promoting the parallel development of stablecoins and tokenized banking, each with a distinct role to play. Moreover, owing to the franchise value of commercial banks and their liquidity advantages within the banking system, the stablecoins they issue are likely to be safer and more stable.
