Hong Kong's Chief Executive, John Lee, confirmed in his opening speech at the Consensus Hong Kong conference on February 11, 2026, that "The Hong Kong Monetary Authority is actively processing stablecoin license applications, with the first batch of licenses expected to be formally issued in March." This statement has refocused market attention on Hong Kong's institutional innovations in the digital finance sector. The Stablecoin Ordinance, which took effect on August 1 last year, marked the formal implementation of the world's first comprehensive regulatory framework specifically for fiat-anchored stablecoins.
Stablecoins are a type of cryptocurrency pegged to a fiat currency, such as the US dollar or Hong Kong dollar, designed to maintain price stability while combining the cross-border efficiency of blockchain technology with the credit backing of fiat money. As of August 2025, the total global market capitalization of stablecoins had reached $270 billion, with USDT and USDC collectively accounting for over 80% of the market share, forming a duopoly. However, this high degree of concentration not only increases "too big to fail" risks but also makes stablecoins potential tools for money laundering and terrorist financing due to their cross-border, 24/7, and peer-to-peer nature. The Chairman of the US Federal Reserve has repeatedly warned that large stablecoins could pose a systemic threat to financial stability.
Against this backdrop, Hong Kong's regulatory framework seeks to strike a balance between innovation and risk control. According to the Stablecoin Ordinance, applicants must meet stringent requirements, including a minimum paid-up capital of HKD 25 million, 100% reserve asset coverage of circulation, regular audits, and unconditional redemption rights. The Chief Executive of the Hong Kong Monetary Authority previously revealed that the authority had received 36 applications and had requested supplementary materials from some institutions, including details on application scenarios, risk management frameworks, and anti-money laundering arrangements. He emphasized that the number of licenses issued in the first batch "will certainly be limited, with a focus on prudence."
The market widely expects that Hong Kong's three note-issuing banks—HSBC, Standard Chartered, and Bank of China (Hong Kong)—as well as institutions like JD Digits Technology, will be strong contenders for the first batch of licenses. A joint venture between Standard Chartered, Ant Group, and HKT, as well as JD Digits Technology, have reportedly entered the second phase of the HKMA's "Stablecoin Issuer Sandbox," testing scenarios covering cross-border payments, supply chain finance, and retail transactions. Rating agency Moody's pointed out that the ordinance could have a positive credit impact for Hong Kong banks that become licensed stablecoin issuers, with large banks gaining a first-mover advantage due to their reputation, liquidity management, and compliance infrastructure.
However, behind this regulatory breakthrough lie underlying concerns. An anonymous source from the financial industry suggested that the stablecoin business in Hong Kong is still in its early stages, with the future direction remaining unclear, and that a cautious approach might be a more prudent strategy for now. The Securities and Futures Commission and the HKMA have also jointly issued a statement urging the public to remain cautious about market volatility related to stablecoin concepts, emphasizing that "expressing interest or submitting an application does not equate to ultimately being granted a license," and warning market participants to avoid making misleading statements.
From a broader perspective, the issuance of stablecoin licenses in Hong Kong represents not just a technical breakthrough but also a strategic move to consolidate its status as an international financial center. Stablecoins can serve as a compliant entry point for traditional financial institutions into the crypto market, acting as infrastructure in areas like cross-border payments, tokenized bonds, and supply chain finance. However, their long-term value depends on two key factors: first, the ability to build effective application scenarios to create network effects; and second, finding a strategic positioning between the internationalization of the Renminbi and Hong Kong dollar liquidity.
In contrast to the steady progress of Hong Kong's stablecoin licenses, the cryptocurrency market has recently experienced significant volatility. Between February 5 and 6, 2026, the price of Bitcoin fell by over 12% compared to the previous day, touching a low of $60,062, a decline of more than 48% from its historical high of $126,000 in October 2025, marking a new 16-month low. Data from Coinglass showed that long position liquidations related to Bitcoin reached $1.096 billion during February 5-6, with over 570,000 traders liquidated. As of February 6, Bitcoin had erased all gains made since Donald Trump's election victory in 2024, with a 31.17% drop over the past 30 days and a fourth consecutive monthly decline, marking the longest losing streak since 2018.
Market pressure continued after the holiday period, with Bitcoin struggling around the $64,000 level. On February 24, Bitcoin was trading at $64,120, down 4.32% in 24 hours, having briefly fallen below the psychological $64,000 mark during the day to a low of $62,680, its lowest level since February 6. After rebounding from the February 6 low of $60,000 to $68,845 on February 17, Bitcoin failed to hold above the $70,000 resistance level and subsequently declined again, falling 7.02% over the past week. As of February 24, Bitcoin's year-to-date decline had widened to approximately 24%, with the retracement from its all-time high still exceeding 48%.
Market analysis suggests this sell-off stemmed from a combination of factors: forced liquidation of leveraged positions, increased volatility in safe-haven assets like gold, a broader pullback in technology stocks, and profit-taking by investors following the realization of gains from perceived "pro-crypto Trump policies." A senior researcher at HashKey Group pointed out that, from a macro perspective, broad liquidity has not increased significantly since the start of the year, setting a general tone of lacking upward momentum for the market. From a capital flow perspective, consecutive weeks of ETF outflows, a narrowing spread between futures and ETF spot prices, and a contraction in arbitrage capital, with some even shifting to precious metals markets, were observed.
However, amidst the high volatility, the resilience of institutional capital is noteworthy. A report released by Coinbase at the conference compared the 2026 market characteristics to "1996 rather than 1999," suggesting the industry is currently in a rational building phase akin to the pre-dot-com bubble era. The chief analyst at New Huo Technology noted in a speech that with the launch of US spot Bitcoin and Ethereum ETFs and policies allowing long-term capital such as pension funds to enter the market, sustained purchasing and holding by institutional investors has become the new normal. Data shows that net weekly purchases of Bitcoin by global publicly listed companies remain substantial. As of February 22, one major strategy had accumulated holdings of 717,722 Bitcoin, with a total acquisition cost of $54.56 billion and an average purchase price of approximately $76,020.
This trend of "institutionalization" is reshaping the market's underlying logic. An Ethereum Foundation member revealed at the Consensus conference that Ethereum is transitioning, through upgrades like EIP-8025, towards an execution layer based on zkEVM proofs, which will significantly reduce node costs and pave the way for institutional-grade applications. He believes Ethereum's position as a global settlement layer will become more entrenched, and its volatility will gradually be absorbed by the market as institutional participation deepens.
Nevertheless, regulatory uncertainty remains a sword of Damocles hanging over the market. The advancement of global regulatory frameworks, such as the proposed US GENIUS Stablecoin Act, while providing a path for compliant innovation, also intensifies market fragmentation. An analyst from CryptoQuant predicted that Bitcoin could potentially find a bottom between $56,000 and $60,000 in 2026, suggesting the market has entered a consolidation phase within a "mid-term maturation" period.
In this dance between technology and regulation, Hong Kong is attempting to seize the strategic high ground with a "compliance-first" strategy. Whether through the institutional design of stablecoin licenses or the regulatory framework for virtual asset trading platforms, Hong Kong is exploring a unique path of innovation.
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