Key Takeaways:
- Economist Hong Hao expects stablecoin market capitalization to surpass $1 trillion.
- He argues HKD-backed stablecoins may offer greater reliability than U.S.-based ones.
- U.S. Treasury demand may increase, though long-term flows hinge on fiscal credibility.
Economist Hong Hao predicted that the market value of stablecoins could surpass $1 trillion in the near term, according to remarks published by Investment News in a summary of his comments from a recent online discussion.
Hong, managing partner at Lotus Asset Management, said the total stablecoin market remains small, but he expects expansion as more firms enter the sector.
HKD Stablecoin vs USD Stablecoin
He noted that most stablecoins issued in Hong Kong are likely to be HKD-denominated rather than backed by U.S. Treasuries, citing the strength of the Hong Kong Monetary Authority’s foreign reserves.
“Stablecoins issued in Hong Kong may be more stable than those in the U.S.,” Hong said, pointing to Hong Kong’s regulatory clarity and resource base. He added that while several Chinese tech firms have obtained licenses to issue stablecoins, many participants are still formulating operational models.
Hong also said the structure of the stablecoin market could boost demand for U.S. Treasuries, but future flows will depend on the fiscal position of the U.S. government.
He specifically referenced past breakdowns in U.S.-issued stablecoins, such as USDC’s depegging events, to argue that the U.S. framework remains underdeveloped. He contrasted this with Hong Kong’s licensing structure and currency peg, suggesting that Hong Kong’s model may offer greater reliability in the long run.
“There have been multiple collapses in the U.S. system,” he said. “It’s not yet mature or completely safe.” He stressed that despite U.S. dominance in early-stage issuance, other currencies could eventually serve as reserve anchors, including gold, Swiss francs, or the pound.
Cross-Border Trade in Global Competition.
In the context of cross-border trade, he argued that stablecoins can reduce costs and speed up transactions, especially for foreign entities engaging with China.
However, he acknowledged the tension between these benefits and regulatory control. “Stablecoins decentralize payment systems, which is something regulators need to watch carefully,” he said.
Hong emphasized that current stablecoin activity represents a long-term shift in digital payments rather than a short-term trend. “The stablecoin boom has already begun, and its role in daily financial life will only grow,” he said.
While stablecoin policy is still taking shape globally, its integration into formal financial systems may test the boundaries between sovereign control and private issuance. For jurisdictions such as Hong Kong, the challenge will be maintaining monetary oversight without stifling cross-border digital payment infrastructure that continues to evolve.
Frequently Asked Questions (FAQs)
He believes stablecoins can reduce transaction costs and processing times in cross-border commerce, especially for foreign entities transacting with China.
Hong suggested that gold, Swiss francs, or pounds could eventually serve as reserve anchors for stablecoins beyond the current USD dominance.
Stablecoins decentralize payment systems, raising questions for regulators over control, compliance, and systemic risk management.
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