Stablecoins are no longer just a crypto niche—they’re emerging as a transformative force in global finance. From cross-border payments to green financial innovation, stablecoins are redefining how value moves across borders and sectors. In a recent exclusive interview, Dr. Tang Bo, Assistant Dean of the Fintech Research Institute at the Hong Kong University of Science and Technology (HKUST), shared his expert insights on the evolving role of stablecoins, regulatory challenges, and strategic opportunities—particularly for Hong Kong’s financial ecosystem.
The Strategic Value of Stablecoins in Modern Finance
Stablecoins bridge the gap between traditional finance and decentralized systems. By pegging their value to real-world assets like fiat currencies, they offer price stability while enabling fast, borderless transactions. According to Dr. Tang Bo, stablecoins hold unique potential in three critical areas: cross-border payments, financial inclusion, and green finance.
Their ability to streamline international transfers makes them ideal for reducing friction in global trade. Unlike traditional banking networks such as SWIFT—which involve multiple intermediaries, delays, and high fees—stablecoin-based transfers operate on blockchain networks that function 24/7 with near-instant settlement.
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Moreover, stablecoins empower underserved populations in emerging markets where banking access is limited. In regions with volatile local currencies or underdeveloped financial systems, stablecoins provide a reliable store of value and low-cost transaction medium—key pillars of financial inclusion.
Regulatory Compliance: Reducing Risk and Building Trust
One of the primary concerns surrounding stablecoins has been regulatory uncertainty. As Dr. Tang notes, early stablecoins like USDT operated in a gray area—widely used but lacking formal oversight. This created risks for businesses, including potential account freezes and lack of legal recourse.
However, regulatory clarity changes the game. Once stablecoin issuers comply with financial regulations, user protection improves significantly. Regulators can mandate reserve audits, enforce anti-money laundering (AML) standards, and require collaboration with insurance providers to safeguard user funds.
But compliance isn’t just about local rules—it demands global regulatory harmonization. For example, a stablecoin facilitating transactions between Hong Kong and Latin America must navigate two distinct legal frameworks. Without coordinated international standards, cross-border operations remain fragmented and risky.
Dr. Tang emphasizes that only through deep integration of global regulatory frameworks can stablecoins achieve true scalability and security.
Banks in the Web3 Era: Adaptation or Obsolescence?
As stablecoins gain traction, traditional banks face a pivotal question: Will they be disrupted—or become key players?
The answer lies in adaptation. While domestic digital payments via platforms like Alipay and WeChat Pay dominate in markets like mainland China, stablecoins shine in cross-border contexts where legacy systems falter.
Banks are already responding. In Hong Kong, major institutions like Standard Chartered are teaming up with fintech firms and telecom providers to launch regulated stablecoins within regulatory sandboxes. Similarly, JPMorgan’s early exploration of its own “JPM Coin” signals growing institutional recognition of blockchain’s potential.
Rather than resist change, banks should integrate into the stablecoin ecosystem—leveraging blockchain for clearing and settlement, reducing reliance on SWIFT, and offering new services tailored to Web3 users.
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Stablecoins as Real-World Assets (RWA): A Foundation for Digital Finance
Are stablecoins real-world assets (RWA)? Dr. Tang affirms they are—specifically, digital representations of fiat currency. While they don’t generate interest like bonds or stocks, their link to tangible reserves qualifies them as tokenized real-world assets.
More importantly, stablecoins serve as the on-ramp to broader RWA adoption. Before investors can buy tokenized real estate or green bonds on-chain, there needs to be sufficient liquidity—and trust—in the ecosystem.
Stablecoins solve this by bringing large-scale capital onto blockchains through efficient cross-border transfers. Once users hold stablecoins, they can seamlessly invest in other RWAs without exiting the digital environment. This creates a self-sustaining cycle: more stablecoin usage → increased on-chain liquidity → greater demand for diversified RWA products.
Thus, stablecoins aren’t just payment tools—they’re foundational infrastructure for the future of on-chain asset management.
Competitive Edge for HKD-Linked Stablecoins
So where does Hong Kong fit in?
According to Dr. Tang, the key to success for Hong Kong dollar (HKD)-linked stablecoins lies in targeted use cases, particularly bilateral currency exchange arrangements.
Instead of competing head-on with dominant USD-pegged stablecoins like USDT or USDC, Hong Kong can leverage its strategic position to build regional payment corridors—especially with Belt and Road Initiative partner countries. By establishing direct HKD-local currency conversion channels, supported by regulatory cooperation, Hong Kong can reduce regional reliance on the U.S. dollar and foster financial sovereignty.
This approach also aligns with broader economic goals: enhancing trade efficiency, supporting SMEs in cross-border commerce, and positioning Hong Kong as a hub for innovative monetary collaboration.
Sustainability Matters: Debunking the Energy Myth
A common misconception is that all blockchain technologies consume excessive energy. However, Dr. Tang clarifies that stablecoins typically run on energy-efficient blockchains.
Unlike Bitcoin’s proof-of-work (PoW) model—which relies on energy-intensive mining—most stablecoins operate on networks using proof-of-stake (PoS) or other low-energy consensus mechanisms. Ethereum’s shift to PoS reduced its energy consumption by over 99%, and platforms like Solana were designed from the ground up for efficiency.
This makes stablecoins well-suited for green finance applications. Imagine carbon credits tokenized on a blockchain using IoT sensors to verify emissions data in real time. Stablecoins could then act as the settlement layer—enabling instant, transparent trading of green assets without contributing to environmental harm.
In this way, stablecoins don’t just support sustainability—they help accelerate the digital transformation of green finance.
Frequently Asked Questions (FAQ)
Q: What makes stablecoins different from traditional cryptocurrencies like Bitcoin?
A: Unlike volatile cryptocurrencies, stablecoins maintain a stable value by being pegged to assets like the U.S. dollar or euro. This stability makes them suitable for everyday payments, remittances, and as a store of value.
Q: Can stablecoins replace traditional banking systems?
A: Not entirely—but they can complement and enhance them. While banks excel in credit services and customer relationships, stablecoins offer superior speed and cost-efficiency in cross-border settlements.
Q: Are stablecoins safe to use?
A: Regulated stablecoins with transparent reserves and compliance measures are generally safe. However, users should prioritize those backed by reputable issuers operating under clear legal frameworks.
Q: How do stablecoins support financial inclusion?
A: They provide accessible financial tools to unbanked populations—especially in regions with unstable currencies—by enabling secure savings, low-cost remittances, and participation in global digital economies.
Q: Is Hong Kong well-positioned to lead in stablecoin innovation?
A: Yes. With strong financial infrastructure, supportive regulators, and proximity to fast-growing Asian markets, Hong Kong can become a leader in developing use-case-driven stablecoin solutions.
Q: Do stablecoins contribute to climate change?
A: No—most run on energy-efficient blockchains. Their underlying technology often consumes negligible power compared to traditional financial systems or PoW-based cryptocurrencies.
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