When Gold Gets "Trapped" in Dubai, It's Time to Firmly "Be Bullish" on Hong Kong

Dubai's gold began experiencing a rare "negative premium" last week.

According to a Bloomberg report citing sources, affected by the ongoing Middle East conflict, a large number of Dubai gold traders, unable to ensure timely delivery, are selling their inventories at wholesale prices of $30 per ounce below the London benchmark price to avoid indefinite storage and financing costs.

Although this gold "negative premium" is mainly concentrated at the wholesale level and has not yet affected retail gold prices, it is almost unheard of in normal markets. Gold has always been considered one of the most liquid physical assets globally. In theory, as long as a significant price difference exists, arbitrage capital would quickly transport it to markets with higher prices, correcting any price dislocation.

This time, however, the arbitrage channel has been severed by the realities of the physical world.

This easily brings to mind the "negative oil price" seen in the oil market in 2020, with a strikingly similar underlying logic: When the delivery of physical assets incurs high transportation, insurance, and storage costs and faces immense uncertainty, a dislocation occurs between the "paper price" and the "actual value."

In other words, gold is just one facet; the underlying issue is a problem with the entire asset mobility channel. This also means that Dubai, as a global offshore financial center, is facing a functional stress test.

1. The Flames of War Reach Dubai: A Cold Assessment of the "Offshore Financial Center"

First, a lesser-known fact: Dubai is not only a global "safe haven" for wealth but also one of the world's most important re-export trade hubs for the gold market.

According to customs and trade data, Dubai imported 1,392 tons of gold in 2024, with a total value exceeding $100 billion, while its export volume also reached a substantial $74 billion. This makes the UAE the world's second-largest gold import and export center. For instance, a significant proportion of gold mined in Africa and refined in the UAE, as well as gold transshipped from Switzerland and London to Asia, passes through Dubai.

It's noteworthy that examining the historical curve of Dubai's gold trade volume reveals 2022 as a significant inflection point. Coinciding with the outbreak of the Russia-Ukraine conflict, Dubai's gold import and export volumes accelerated sharply. A large amount of capital and physical assets originally flowing through the European system, under the combined effects of sanctions, compliance, and geopolitical fragmentation, rerouted through Dubai to find new pathways.

This is actually a microcosm of Dubai's rise: Others' crises are precisely its windows of opportunity.

As a trade hub connecting Asia, Europe, and Africa, Dubai has attracted wealth from around the globe over the past two decades, leveraging free capital flow, low tax rates, and a relatively stable political and business environment. From Russian oligarchs to global family offices to Middle Eastern oil capital, all view it as a crucial node for asset storage, clearing, and circulation. More importantly, Dubai has often been a beneficiary during periods of external geopolitical turmoil.

It was unexpected, however, that this time, the wind has shifted towards Dubai itself.

Source: Bloomberg

The essence of "finance" is the circulation of capital, and the prerequisite for circulation is the efficient and secure movement of assets.

Therefore, when physical circulation channels are blocked, the impact won't be limited to the gold market. All physical and financial assets reliant on cross-border mobility will face similar challenges. Moreover, this touches upon a more fundamental question—what is the first principle of an offshore financial center?

The answer is simple: two words—security.

Not tax rates, not registration convenience, not lax regulation—these are secondary competitive advantages. The primary reason capital is willing to park in a financial center is always the most basic concern: Can your money be withdrawn at any time? Can it be transferred securely when needed?

Once this foundational assumption cracks, the entire value system begins to loosen. The inability to ship gold is merely the first visible signal of this "certainty" fracturing.

It's crucial to understand that the status of an offshore financial center is not maintained forever by a mere "International Financial Center" plaque. It is the result of being repeatedly tested and chosen through successive crises. Every major geopolitical shock is, in effect, a covert "re-tendering" process. Capital reassesses where is safer, whose "certainty" is more trustworthy, and then irreversibly shifts its chips in that direction.

Historically, such migrations have occurred more than once.

Beirut was once the financial center of the Middle East until war destroyed it. Hong Kong experienced capital flight before 1997, later rebuilding trust due to institutional stability. The rise and fall of offshore financial centers are never slow, linear processes. They often appear calm for extended periods, only to undergo a rapid, disorienting shift in gravity after a certain tipping point.

From this perspective, the prosperity of offshore financial centers like Dubai, Singapore, the Cayman Islands, and Switzerland is built upon a common historical backdrop: "Peaceful Globalization." They often lack vast domestic industrial systems or military power sufficient to support financial hegemony. Their financial status largely stems from the stability of the global order. In a sense, they have benefited from the "peace dividend" in the interstices of great power rivalry.

But as the world shifts from "Peaceful Globalization" to a new paradigm of "Great Power Rivalry, Rule Restructuring, and Geopolitical Priority," the risk premium of these financial nodes will inevitably be repriced.

As the current Middle East conflict reveals, a city highly dependent on the continuous external supply of food, water, energy, and even financial clearing chains sees its fragility magnified exponentially once external channels are systematically severed.

True neutrality detached from power structures never exists. "Offshore" ultimately must attach itself to a larger order and stronger security backing.

As this logic is re-understood, capital's flight paths will also change. The question then arises: If Dubai shows cracks, where is the next stop?

2. Dubai Stumbles, Who is Positioned to Benefit?

Theoretically, the options are limited.

Return to Europe and the US?

Unlikely, as much of this capital originally flowed out from Russia, Europe, and the US precisely to avoid sanction risks, political risks, and stricter regulatory pressures, choosing Dubai as a landing spot. "Returning" would simply re-expose it to the very risk structures it sought to evade.

Shift to Singapore?

Seemingly logical, as Singapore has always been Dubai's most direct competitor. However, this also means it is, to some extent, the "Southeast Asian version of Dubai"—small in scale, lacking strategic depth, highly dependent externally, and long within the reach of the US political system. Moreover, under FATF compliance pressures, account opening thresholds and review requirements have tightened in recent years. For funds with high sensitivity and strong cross-border attributes, Singapore is not without appeal, but it may not be able to absorb all the spillover demand.

It is against this backdrop that Hong Kong is increasingly reappearing in conversations. Friends at licensed virtual asset institutions in Hong Kong have told the author that business inquiries from the Middle East and related regions are showing visible growth. These are not primarily from retail speculators but more from institutional and corporate sides like family offices, cross-border trade settlement platforms, and foreign trade companies.

Hong Kong is quietly absorbing the spillover of safe-haven capital from the Middle East conflict.

Structurally, Hong Kong indeed possesses a unique "combination of advantages" in the current international financial market landscape: being a free port for financial capital while also having a well-developed financial governance and regulatory system.

• The first card is the institutional foundation of a capital free port: Hong Kong maintains its linked exchange rate system between the Hong Kong dollar and the US dollar, with highly free capital movement. More crucially, compared to some offshore nodes purely reliant on the globalized environment, Hong Kong is backed by a large economy and a mature financial system, offering stronger institutional continuity and security expectations.
• The second card is a highly mature monetary governance system and the linked exchange rate system: For global capital, the US dollar remains the core unit of transaction pricing. Whether for corporate clearing, trade finance, or foreign exchange conversion, Hong Kong's adoption of the US dollar and Hong Kong dollar-linked exchange rate system, coupled with mature US dollar liquidity infrastructure, gives it a natural advantage in attracting cross-border capital today.

Beyond this, there is a deeper layer of logic to Hong Kong's current opportunity—and this layer is precisely the most intriguing aspect of the Dubai gold discount incident.

As mentioned, the fundamental reason Dubai's gold can only be sold at a discount is not that gold has lost value, but that the transfer of physical assets is highly dependent on physical world channels—flights, ports, insurance, storage. If any of these conditions falter, even the most standardized, "hard currency" asset can instantly lose liquidity.

So, is there an asset that can achieve second-level transfers, 24/7 settlement even when flights are grounded and transport is blocked, minimizing reliance on traditional logistics and cross-border friction to reduce various capital costs and achieve maximum efficiency?

Yes. On-chain virtual assets, especially stablecoins.

Stablecoins represented by USDT/USDC can complete cross-border value transfers within minutes, independent of logistics, requiring no storage, and facing minimal border friction. When the review chains of the traditional banking system lengthen due to geopolitical risks, when compliance costs surge and clearing efficiency declines, or even when chain-breaking risks emerge in extreme scenarios, this "frictionless, borderless, 7x24" settlement method demonstrates an almost overwhelming advantage.

This is precisely another core layer of logic behind why Middle Eastern capital is re-evaluating Hong Kong.

They may not necessarily be speculating on crypto assets themselves but are more likely seeking a more efficient, secure clearing, settlement, and foreign exchange alternative outside the traditional banking system. And Hong Kong happens to possess one of the world's clearest, most compliant, and most financially connected digital asset markets today. For many Middle Eastern funds, what they truly seek is a financial node that simultaneously offers a stable regulatory environment, US dollar liquidity, and on-chain settlement capabilities.

As competition among offshore financial centers incorporates the new variable of virtual assets, the hand Hong Kong holds is becoming increasingly difficult to replicate.

3. Hong Kong × Virtual Assets: The "Historic Opportunity"

It is no exaggeration to say that since the Hong Kong SAR government issued its Policy Declaration on Virtual Assets on October 31, 2022, Hong Kong may be welcoming a rare historical window where "timing and conditions" converge—a truly "historic opportunity" for Hong Kong.

Within the global financial system, Hong Kong has long played a crucial role in connecting Eastern and Western capital. Its greatest strength has never been merely operating a local market but organizing capital from different systems, currencies, and risk appetites into a calculable, connectable, clearable framework, enabling its efficient flow.

This capability is equally applicable, and perhaps even more scarce, in the era of crypto finance.

As is well known, Hong Kong has been continuously building new digital financial infrastructure over the past three-plus years, striving to connect the early-stage financial ecosystem. This encompasses locally licensed trading platforms (VATPs) represented by OSL HK and Hashkey Exchange, along with their underlying custody, tokenization services, and deep connections with the traditional financial system. A number of licensed Virtual Asset Service Providers (VASPs) have also emerged.

More intriguingly, on the same timeline as the accelerated restructuring of the global geopolitical order, Hong Kong's virtual asset, especially stablecoin, regulatory framework has gradually reached the "final mile" after years of deliberation:

• Regulatory consultation launched in 2022;
• Regulatory sandbox testing introduced in 2024;
• The Stablecoin Bill passed by the SAR Legislative Council on May 21, 2025;
• The Stablecoin Ordinance officially took effect on August 1, 2025;
• By March 2026, the first batch of stablecoin licenses is on the verge of being issued.

Viewed among major global financial centers, this is one of the most systematic and robust compliant fiat-backed stablecoin regulatory frameworks to date, also preceding the comprehensive implementation of similar legislation in many major economies like the US.

According to signals previously released by the Hong Kong Monetary Authority (HKMA), the first batch of stablecoin issuer licenses is expected to be issued gradually starting early 2026, with a limited initial number. Entry thresholds and ongoing regulatory requirements will be extremely high, benchmarked against banking standards. Precisely because of this, Hong Kong's stablecoin licenses are likely to become one of the most valuable types of compliance credentials in the global digital finance field. On-chain stablecoins have long ceased to be a niche topic within the crypto-native world; they are accelerating their transformation into a new mainstream tool reshaping cross-border payment and global trade settlement infrastructure.

For the cross-border capital flowing into Hong Kong from the Middle East, this evolving stablecoin ecosystem signifies far more than just a new investment category. It represents a new clearing and settlement channel with sovereign-level compliance backing, operating 24/7, and unconstrained by physical borders, finally emerging as the traditional banking system faces lengthened reviews due to geopolitical friction or even chain-breaking risks.

As mentioned, the current business inquiries from the Middle East are not primarily about simple retail native cryptocurrency trading but more about bulk transactions and cross-border trade settlement at the corporate and institutional level.

These demands are also catalyzing new role definitions for Hong Kong's locally licensed institutions.

At this stage, the only relatively complete observable entity in the Hong Kong virtual asset market for对接 institutional and corporate trade settlement needs is OSL Group (863.HK), a listed company that operates Hong Kong's first licensed trading platform and possesses global compliant channels, payment, and trading networks. On the eve of the official enactment of Hong Kong's Stablecoin Ordinance last year, OSL Group launched three new products fully targeting institutions: the compliant stablecoin management platform StableX, the asset tokenization service Tokenworks, and the enterprise-grade crypto payment solution OSL BizPay. This year, OSL Group further launched USDGO, an enterprise-grade compliant US dollar stablecoin compliant with US federal regulation and distributable in Hong Kong, primarily targeting cross-border e-commerce, bulk trade, and interactive entertainment.

This clearly extends beyond traditional exchange business, moving into compliant stablecoin management, asset tokenization, and enterprise-grade payment solutions. In a sense, it points to the essence of the matter: in this round of competition, compliant virtual asset platforms are no longer competing solely on trading matching capabilities but on who can recognize and evolve first into the infrastructure node for the next generation of cross-border global capital flow.

In Conclusion

The more turbulent the world, the more expensive certain assets, certain systems, and certain pathways become.

The ripple effects from the Iran situation continue to unfold. This time, no one knows where the endpoint lies, but it is almost certain: some opportunities, once lost, are difficult to regain; some pathways, once formed, create powerful inertia.

In the past, discussions about Hong Kong's virtual asset market often remained within the narrative framework of a "compliance model"—to some extent, it was a policy testing ground, a frontier for regulatory exploration, but not yet deeply integrated with the underlying logic of global capital flow.

In the early stages of Hong Kong launching compliant HKD stablecoins, retail (C-end) demand and scenario expansion will likely be the initial focus for regulators and licensed institutions. However, this does not mean that stablecoins compliantly issued or distributed in Hong Kong cannot seek broader real-world application and possibilities. This is not something achievable overnight. But sometimes, opportunities arrive much faster than anticipated. The key lies in who is prepared to seize and realize breakthroughs.

With the accelerated restructuring of the geopolitical landscape, rapid changes in financial markets, and the formalization of stablecoin regulation, the significance carried by Hong Kong's licensed virtual asset platforms is being rewritten. This is not only an opportunity for Hong Kong but also, to some degree, a historic moment for Hong Kong and its cohort of licensed virtual asset institutions to deeply embed themselves into the global trade cross-border payment and settlement system.

The objective conditions are in place, the policy framework is closing, and the infrastructure is accelerating its formation. Only one question remains:

Can Hong Kong truly play this hand well?