Stablecoins are increasingly recognized as a bridge connecting traditional finance and the crypto world. Against the backdrop of a gradually clarifying global regulatory landscape, Hong Kong is actively embracing stablecoins with the intention of establishing an international digital asset center. Meanwhile, a new competition in the stablecoin market is quietly unfolding, with USD1, a project under the Trump family’s crypto initiative WLFI, emerging as a strong contender, with trading volumes closely following Tether (USDT) and USDC. This article will delve into the development trends of stablecoins in Hong Kong, the rise of USD1, and its potential impact on the existing stablecoin landscape, as well as analyze the opportunities and challenges stablecoins face in different market environments.
The Hong Kong Special Administrative Region government is progressively moving from policy declarations to concrete practices in the digital asset field. Financial Secretary Paul Chan emphasized the immense potential of fintech in cross-border trade applications, noting that stablecoins, as a cost-effective alternative outside the traditional financial system, are expected to address pain points such as slow cross-border payment speeds and high costs, thereby better serving the real economy.
The recently released "Digital Asset Development Policy Declaration 2.0" clearly identifies "promoting application scenarios and cross-sector collaboration" as one of its four pillars, highlighting Hong Kong's determination to advance the practical application of stablecoins. More importantly, the legislation governing stablecoins will officially take effect on August 1 of this year, marking a significant step forward in Hong Kong's regulatory framework for stablecoins. The Secretary for Financial Services and the Treasury, Christopher Hui, further clarified that stablecoins should be viewed as tools for enhancing financial efficiency rather than speculative targets. The government will require issuers to have sufficient capital or reserves and establish redemption mechanisms to mitigate financial risks and safeguard monetary sovereignty.
Hong Kong's initiative aims to create a favorable market environment to attract stablecoin issuers to promote their applications across various scenarios, helping to address the practical pain points faced by businesses and citizens. This aligns with Tether's strategy of achieving breakthroughs in "market failure" regions by creating value through addressing the pain points of the existing financial system. As an international financial center, the establishment of a stablecoin framework in Hong Kong will undoubtedly inject new vitality into the global stablecoin market and may become an important hub for connecting the circulation of digital assets between the East and West.
While Hong Kong is actively laying the groundwork for stablecoins, the stablecoin market itself is also experiencing significant changes. On June 29, USD1, the stablecoin under the Trump family’s crypto project WLFI, made a remarkable showing, with a trading volume of $1.25 billion in the past 24 hours, setting a historical record, second only to Tether (USDT) and USDC. This data not only demonstrates USD1's strong market appeal but also indicates that competition in the stablecoin market is becoming increasingly fierce.
The rapid rise of USD1 may be attributed, on one hand, to its association with the Trump family, attracting attention and support from specific communities; on the other hand, it reflects the market's demand for diversified stablecoins with specific backgrounds. Although its trading volume still lags behind USDT and USDC, breaking into the top three in such a short time undoubtedly puts considerable pressure on existing stablecoin giants.
The vigorous development of stablecoins has transcended the realm of mere cryptocurrencies, becoming a key force influencing the global financial landscape.
Market adoption and strategic transformation of traditional giants: The annual trading volume of stablecoins has surpassed $27.6 trillion, exceeding the combined total of Visa and Mastercard, a structural trend that is forcing traditional financial giants to accelerate their transformation. Mastercard's strategy is particularly aggressive, as it evolves from a traditional "network dispatcher" to a core coordinator of on-chain value flow. By collaborating with Paxos (USDG), Fiserv (FIUSD), and PayPal (PYUSD), Mastercard aims to penetrate the "final settlement layer" of funds, restructuring its platform power from the information flow directive layer to the value flow settlement layer. Alchemy's engineering director Noam Hurwitz pointed out that stablecoins have become the backbone of internet payments, and their "explosive" growth has made them the default settlement layer of the internet.
Tether's "localized" strategy: Tether's success lies in its "localized" approach to different financial environments. In highly mature markets like the United States, the marginal improvement of stablecoins is limited, prompting Tether to shift towards building AI wallets, IoT interfaces, and programmable payment SDKs, exploring a new generation of "digital operating systems" centered on yield returns and programmability. In emerging markets with insufficient financial coverage, such as Nigeria and Argentina, stablecoins have become a practical solution for cross-border payments and asset preservation, with Tether achieving breakthroughs by addressing "market failures."
Regulatory risks and geopolitical competition: The rapid development of stablecoins is also accompanied by increasing regulatory risks. A report by SlowMist revealed that "Huiwang Payment" on the TRON network may be involved in illegal fund flows exceeding 50 billion USDT, highlighting the challenges stablecoins face in anti-money laundering efforts. This has prompted regulatory agencies to strengthen cooperation, such as Tether freezing assets and FinCEN's intervention, ultimately leading to the cessation of "Huiwang Payment" operations. Meanwhile, countries like Russia are accelerating the construction of their own pegged currencies and independent exchange cross-border payment networks, aiming to bypass the SWIFT and dollar systems, indicating that stablecoins have become tools of geopolitical competition.
The future development of stablecoins will revolve around three core dimensions: efficiency enhancement, compliance strengthening, and ecosystem building.
First, efficiency enhancement remains the core competitiveness of stablecoins. Whether in cross-border payments, on-chain settlements, or programmable finance, stablecoins will continue to strive to provide faster, cheaper, and safer transaction experiences. The strategic transformations of Mastercard and Tether point towards further unlocking the potential of stablecoins through technological innovation and ecosystem collaboration.
Second, compliance will be key to whether stablecoins can achieve broader adoption. The enactment of Hong Kong's stablecoin legislation, along with the gradual clarification of global regulatory frameworks for stablecoins, indicates that the issuance and use of stablecoins will become more standardized. This will help enhance market confidence and attract more traditional financial institutions and enterprises to participate.
Finally, ecosystem building will determine the long-term viability of stablecoins. Tether is attempting to construct a "digital operating system" through AI wallets, IoT integration, and SDK openness; Mastercard is building its on-chain wholesale settlement network by integrating mainstream stablecoins. These developments indicate that future competition in stablecoins will not only be about individual currencies but also about the entire ecosystem built around stablecoins.
The implementation of Hong Kong's stablecoin policy sets a new benchmark for the global development of stablecoins, heralding the arrival of a more regulated and vibrant era for stablecoins. The rise of Trump's USD1 introduces new variables to the stablecoin market, challenging the dominance of USDT. Stablecoins are at the intersection of industrial opportunities, geopolitical competition, and regulatory reshaping, and their future development will profoundly impact the global financial landscape. We look forward to seeing more innovative applications and more comprehensive regulatory frameworks that will collectively propel stablecoins onto a broader stage.
Related: Hong Kong Digital Asset Declaration 2.0: Stablecoin Regulation Takes the Lead, Challenging the Global Web3 Center
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