Dialogue with Xiao Feng: Some sober reflections returning to common sense at the boiling moment of stablecoins in Hong Kong

On August 1, 2025, the Stablecoin Ordinance in Hong Kong officially came into effect, marking the official implementation of the world's first regulatory framework centered around a licensing system for fiat - anchored stablecoins.

As Hong Kong introduced the stablecoin licensing system, stablecoins and Real - World Assets (RWA) have become extremely popular terms in the Chinese - speaking world. Dr. Xiao Feng, the Chairman and CEO of HashKey Group, known as the "Godfather of Chinese Blockchain," shared his commonsense - based sober reflections on this craze with Hong Jun, the host of Silicon Valley 101, and Liu Feng, the host of Web3 101.

The following is a selection of the conversation:

01 Sober Reflections Amid the Stablecoin and RWA Craze

Liu Feng: Why are people so concerned about Hong Kong's stablecoin ordinance? What are the key points worthy of special attention in Hong Kong's regulation of cryptocurrency and digital assets?

Xiao Feng: Personally, I think the enthusiasm is a bit over the top.

I was having coffee with a friend in a hotel café a few days ago, and I noticed that people at several nearby tables were all talking about stablecoins. Not long ago, we also had a discussion about stablecoins with officials from the Hong Kong Monetary Authority (HKMA). The officials repeatedly reminded us that the hype was too high, and Hong Kong would not issue many licenses. Moreover, Hong Kong is likely to be very cautious in the initial stage of stablecoin issuance. I think the implication is that it will be very strict, not only in the licensing process but also in regulation, especially in the regulation of anti - money laundering in the use of stablecoins in the cryptocurrency (Crypto) field. The strictness will almost exceed people's expectations.

August 1 is just the effective date of Hong Kong's stablecoin bill, which does not mean that everyone can start applying for a Hong Kong stablecoin license on that day. Although there are rumors in the market that dozens or even hundreds of companies are applying, I believe that only a very small number of applications will be accepted by the HKMA. The most important thing is that they will pay great attention to the background of any applicant, especially their background in financial risk management and their experience and ability in anti - money laundering.

Source: The official website of the Hong Kong Monetary Authority

Hong Kong is an international financial center with decades of experience. So, Hong Kong's regulatory authorities, whether it's the SFC (Securities and Futures Commission) or the HKMA (Hong Kong Monetary Authority), are indeed very sensitive to trends in the international financial market. This actually creates a contrast in people's discussions about Hong Kong's stablecoin situation.

I have also participated in many seminars in the Chinese mainland. In the mainland, when discussing stablecoins, especially offshore RMB stablecoins, people tend to explain them from the perspective of currency, the competition among major - power currencies, and the hegemony of the US dollar. However, Hong Kong is different. I originally thought it would be great if so many institutions, people, and funds from the mainland were willing to come to Hong Kong to build, issue, or use stablecoins, which would be a huge benefit to Hong Kong as an international financial center.

However, the impression I got from Hong Kong's regulatory authorities is that their primary concern, or the core of their concern, is whether there will be loopholes in anti - money laundering due to stablecoin issuance. After all, stablecoins are outside the bank account system and the Swift (Society for Worldwide Interbank Financial Telecommunication) system. So far, financial regulatory authorities lack effective regulatory means for the circulation of stablecoins after "Mint" (the "creation" or "issuance" of new crypto - assets). Therefore, Hong Kong is more concerned about the potential loopholes in anti - money laundering.

Since Hong Kong is an international financial center, if it is criticized by other major international financial centers in terms of anti - money laundering, it will have a huge impact on its reputation as an international financial center. This may be a completely different perception from what people generally think. Although there is a lot of hype in Hong Kong, the regulatory authorities are very cautious about stablecoins, which is a huge gap.

Liu Feng: So, what you've observed is that Hong Kong's regulatory agencies are very cautious, not like the rumors in the market that "everyone can succeed."

Xiao Feng: Yes, it's completely different.

Liu Feng: There is a gap between the hustle and bustle in the market and the cautious and cold - handling attitude of the regulatory agencies. You've been advocating and promoting the transparency and standardization of digital asset legislation in Hong Kong for many years. I originally thought you might be shouting, "This is really a great era coming," but the gap seems quite large. How do you view this contrast, as well as the different contrasts over the years, from past criticism and rejection to the current seemingly open - armed new attitude?

Xiao Feng: I can tell you a story from my own experience. HashKey was established in Hong Kong at the end of 2018. Since the Chinese mainland introduced stricter regulatory measures in 2017, we moved this business to Hong Kong because it is legal and compliant here. In early 2019, I visited the Hong Kong Securities and Futures Commission (SFC) and said that I hoped to apply for a license for a Crypto exchange in Hong Kong to operate in a licensed, compliant, and regulated manner.

The official who received me at the SFC said to me, "Mr. Xiao, you don't need a license to open a virtual currency exchange in Hong Kong, and it's not illegal. You can just go left when you go out and open one."

In 2022, I visited the deputy director of the HKMA, along with five or six others, and we sat in his meeting room. I said that we wanted to apply for a Hong Kong stablecoin license. The deputy director said the same thing. He said, "Mr. Xiao, it's not illegal to issue stablecoins in Hong Kong, and we don't have the right to regulate you."

At that time, since I had been in Hong Kong for a few years, I told him that we had actually invested in a stablecoin company in Hong Kong with several other institutions, but we couldn't make it work. The deputy director asked me why. I replied, "No bank in Hong Kong is willing to provide us with services related to stablecoins. Customers can't have normal fiat - currency deposits and withdrawals. Unless we only deal with coin - to - coin transactions, but I don't want to do that."

The deputy director said, "That's right, because banks are under my supervision."

Why did the two heads of the Hong Kong SFC and the HKMA say the same thing? Because Hong Kong follows the Anglo - American legal system, and two core principles in the framework of common law are:

The first principle is everything is allowed unless prohibited by law. In 2019, there were no laws in Hong Kong regarding Crypto, so you could do anything in Hong Kong. There was no legal prohibition against setting up an exchange.

At the same time, both the Hong Kong SFC and the HKMA said, "We have no right to issue licenses or regulate you." This is because of the second principle in common law, which is nothing can be done without legal authorization. If you open an exchange on the street, they have no right to shut you down.

At that time, I also joked, "So, does it mean that no one will regulate me in Hong Kong if I open an exchange?"

The deputy director said, "It's not that no one will regulate you. There are people who will."

I asked, "You don't regulate me. Who else will?"

The deputy director said, "The Commercial Crime Bureau of the police will regulate you."

The meaning is that even if it's a virtual commodity, you can't defraud consumers. The things you operate are not securities, so the SFC has no right to regulate you. But at least it can be regarded as a commodity, so it falls under "consumer protection" rather than "investor protection." There are still people who will regulate you, which shows a huge difference in Hong Kong.

Source: Investopedia website

Note: The Anglo - American legal system, also known as the common law system, is one of the two major legal systems on par with the Continental legal system. It originated in medieval England. Currently, one - third of the world's population lives in jurisdictions under the Anglo - American legal system or in mixed civil - law systems, most of whom are from Commonwealth countries. In terms of legal sources, the characteristic of the Anglo - American legal system is case law, which means repeatedly referring to previous court decisions to eventually form a general and established legal system similar to moral concepts.

This also leads to the second problem. People in the industry often say that the compliance cost in Hong Kong is very high, and it's not profitable to do business here. Of course, compliance comes with costs, and this view has some truth. After all, the industry we're in can be considered a new form of finance brought about by fintech. As a large - scale industry, finance has strong externalities. So, over the past few hundred years, a set of rules for protecting investors and consumers has gradually been accumulated, and these rules will inevitably bring about operational costs.

If our industry is not willing to bear these costs, the problem is that it may never grow. If you envision a market worth trillions or even hundreds of trillions of US dollars, then you must accept the constraints of spill - over effects.

Since the Chinese mainland began to restrict, standardize, and even ban certain Crypto - related businesses in 2017, I've been thinking about when and where the Chinese mainland will start to accept these things again. There has been no answer for several years. In the past month and a half, I think I've found the answer. I've participated in many internal seminars in Beijing, which were triggered by the stablecoin bills in Hong Kong and the United States. Most of the discussions in the mainland took place after the Stablecoin Ordinance Bill was passed in Hong Kong on May 21, and the United States is also actively working on the Genius Act.

Sitting in those seminars, I suddenly realized that the Chinese mainland will start to accept the entire Crypto field by accepting stablecoins. As of Sunday, there are still different views in Beijing, but two consensuses are gradually emerging. The first consensus is that in the face of the global wave of legislation and compliance regarding Crypto, stablecoins, and blockchain, China cannot continue to turn a blind eye and must take countermeasures.

Source: CNBC

Note: The Genius Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) is a bill in the 119th United States Congress. The bill requires the federal government to establish a regulatory framework for digital currencies, clearly define the legal status of stablecoins, require stablecoin issuers to establish a 1:1 reserve of assets (must be US dollars or US Treasury bonds), and implement consumer protection and anti - money laundering mechanisms.

The second consensus is about how to respond. As my friends in Beijing put it, "Whether to fight the Huaihai Campaign has been decided, and it must be fought. The question now is how to fight it? Fight a small - scale or large - scale battle? Which corps to annihilate first?" Sitting there, I felt that this is where the acceptance will start. After all, if China continues to turn a blind eye and not accept stablecoins, it may be at a disadvantage in the competition among national currencies. I think China's top leaders have actually recognized this problem. That's why at the recent Lujiazui Forum, Zhou Xiaochuan, the former governor of the central bank, gave a speech with the main idea of being vigilant about the impact of US - dollar stablecoins on the dollarization of the international monetary system.

This clearly shows the view of US - dollar stablecoins from the perspective of national currency competition, and China obviously cannot ignore it. At the same time, I predict that, as the saying goes, "If there is a beginning, there will be an end." Since you start to accept stablecoins, you will inevitably accept public blockchains (Public Blockchain), otherwise, your stablecoins will have no global competitiveness, and issuing them will be in vain.

What might be accepted next? I think by this time next year, we may be discussing RWA (Real World Assets). The Chinese mainland may start to accept asset tokenization. After all, RWA has the same characteristic as stablecoins: it can support the real economy. Things that can support the real economy are more likely to be accepted by mainland officials, regulatory authorities, and the government. Of course, after accepting RWA next year, the third step in the future may be to accept Bitcoin.

Source: DEFIPLOT

Note: RWA (Real World Assets) refers to the process of mapping traditional real - world assets (such as real estate, bonds, stocks, gold, accounts receivable, etc.) to the blockchain through tokenization, enabling them to be circulated, traded, and financialized on the chain.

Liu Feng: You've painted a picture in our minds of how we might truly embrace blockchain and digital assets in China in the future. It seems that we'll start by understanding the technology through stablecoins. Due to the game of major - power currencies, we have to embrace stablecoins, which don't seem very "Crypto - like" at first. Then, we'll gradually embrace trends like RWA, which uses blockchain technology for tokenization and can support the real economy. Further down the road, we may find that we have to embrace a broader range of technologies, product forms, business models, and financial innovations centered around blockchain technology. What do you think the challenges might be in this process?

Xiao Feng: I think the challenges come from two aspects. On the one hand, the European Union, the United States, some economically developed countries, as well as international anti - money laundering organizations, the Bank for International Settlements, and the Financial Stability Board, have all expressed their concerns to Hong Kong about its large - scale promotion of stablecoins, especially RMB stablecoins. They worry that it may facilitate China's oil trade with Russia, Iran, and Venezuela, which are all countries under UN sanctions.

In the past, it was relatively more troublesome to use fiat - currency channels, and it was easier to monitor. However, if you use stablecoins that are outside the banking system and the Swift system, it will completely decouple from the existing set of financial rules and regulations established by Europe and