Hong Kong’s stablecoin bill boosts wealth management, pressures payments

Stablecoins issued in Hong Kong could increase competition particularly in wholesale payments.

Hong Kong’s new stablecoins ordinance could put more pressure on local banks’ especially in the field of digital payments but could be a positive for their wealth management businesses.

"Stablecoins issued in Hong Kong could increase competition for banks, particularly in wholesale payments, due to potential advantages in cost and speed," said Phyllis Liu, credit analyst at S&P Global Ratings.

"Hong Kong banks will seek to participate in the market to avoid disintermediation threats,” Liu continued.

At the same time, the opening could enhance banks' wealth management services and potentially attract more mainland China customers with such offerings, the ratings agency said.

"By offering stablecoin-linked products or digital assets, Hong Kong banks may attract customers locally and across borders that are seeking offshore crypto exposures,” said Michael Huang, credit analyst for S&P.

Market interest in Hong Kong is ‘very strong’ with the Hong Kong Monetary Authority saying that it expects to grant only a handful of stablecoin issuer licenses.

“We anticipate first movers will likely be big tech companies and large banks that have deep resources and technological skills,” S&P said.