May 21, 2025 marked a watershed moment as Hong Kong’s Legislative Council unanimously passed the Stablecoin Ordinance, establishing the world’s first comprehensive regulatory framework for fiat-backed stablecoins. While superficially reinforcing the dollar’s dominance—pegged to USD and backed by U.S. Treasuries—stablecoins fundamentally unshackle the dollar from traditional banking systems, enabling cross-border flows that bypass SWIFT and regulatory layers via blockchain networks.
This is not a challenge to the dollar’s credibility but a revolution in how it circulates globally. Below, we dissect the institutional logic of stablecoins, their impact on U.S. debt dynamics, and the emerging investment opportunities.
Stablecoins: The Interface for "On-Chain Dollars"
Stablecoins extend existing monetary systems into the digital realm by pegging real-world assets to blockchain-based tokens. They bridge traditional finance and crypto ecosystems, enhancing transactional stability and cross-border efficiency. Three primary types exist:
Fiat-Collateralized Stablecoins (e.g., USDT, USDC):
- Backed 1:1 by fiat reserves (typically USD/short-term Treasuries).
- Reliant on issuer transparency (e.g., Circle’s audited reserves for USDC).
Crypto-Collateralized Stablecoins (e.g., DAI):
- Overcollateralized with volatile assets (e.g., 150% ETH抵押).
- Decentralized but prone to liquidation risks during market turbulence.
Algorithmic Stablecoins (e.g., defunct UST):
- Peg maintained via supply mechanics (e.g., dual-token models).
- High susceptibility to death spirals during confidence crises.
👉 Explore how stablecoins optimize cross-border payments
The Dollar’s "Rentier" Mechanism: Three Layers of Control
Debt-Driven Monetary Supply:
- U.S. deficits are globalized via Treasury purchases by central banks/institutions.
Dollar Pricing Power:
- Commodities (oil, gold) and financial assets (stocks, bonds) are USD-denominated.
SWIFT Monopoly:
- Controls 90%+ of cross-border payments, enabling U.S. sanctions (e.g., Iran, Russia).
Stablecoins disrupt Layer 3 by enabling peer-to-peer flows outside SWIFT, shifting control from governments to private issuers and smart contracts.
The Stablecoin Paradox: Boosting Usage While Eroding Control
Short-Term Benefits:
- Expands dollar’s reach into gray markets (e.g., capital-controlled regions).
- New demand for short-term Treasuries (~70% of Tether’s reserves are 3-month bills).
Long-Term Risks:
- Decentralized Issuance: Tether/Circle operate outside Fed oversight.
- Fragile Credit: Reliant on corporate trust (e.g., USDT’s 2021/2023 liquidity scares).
- Multi-Currency Anchors: Potential future diversification (黄金, CNH) threatens USD’s exclusivity.
Hong Kong’s Stablecoin Ordinance: A Game Changer
Effective August 1, 2025, the ordinance:
- Defines stablecoins as payment tools with 100% fiat reserves.
- Bans anonymity/leverage, mandates licensing.
Positions Hong Kong as Asia’s compliant USD gateway:
- For Investors: Focus on firms enabling stablecoin落地 (e.g., Alipay HK, HSBC’s tech partners).
- For HKD: Potential uplift as a "chain-settlement currency."
Investment Strategies
On-Chain Infrastructure Providers:
- Payment processors, identity verifiers (e.g.,恒生电子).
Digital RMB Pilot Plays:
- Firms with cross-border blockchain solutions.
HKD Asset Revaluation:
- Financial/tech stocks tied to stablecoin清算.
👉 Discover key stablecoin investment opportunities
FAQs
Q: Will stablecoins replace the U.S. dollar?
A: No—they redefine its circulation paths, not its value.
Q: How do stablecoins affect U.S. Treasury markets?
A: They create new marginal demand (~35B inflows压低短端利率 2–2.5bps).
Q: What’s Hong Kong’s regulatory advantage?
A: Offers a non-U.S., compliant hub for链上美元流动.
Risk Note: Policy uncertainty, geopolitical tensions, and liquidity crunches could disrupt stablecoin ecosystems.
Authors: Xu Chi (CSC Strategy), Zhang Wenyu | Source: Minority Investment