The True Target of Hong Kong's "Open Scheme" Has Never Been Stablecoins

Original Author: Will A Wang

After missing its self-imposed deadline last month, the Hong Kong Monetary Authority (HKMA) has finally issued its first batch of stablecoin licenses—to HSBC and Standard Chartered. This aligns with the analysis in our previous article "Hong Kong Dollar Stablecoin Doesn't Need to Become USDC".

While the outcome itself was hardly surprising, it is nonetheless disappointing.

Coincidentally, I've been following Professor Jiang Xueqin's series on geopolitical game theory, and Rain also wrote an article titled "Hong Kong Stablecoin: A Meticulously Designed 'Open Scheme'". With these two things converging, I'd like to try applying a game theory lens to "wildly" re-examine this licensing round, hoping to provide some food for thought.

Jiang Xueqin's logic in analyzing Trump's Iran war goes like this: On the surface, this war seems like a foolish blunder. But what if we change the assumption using game theory—what if Trump's goal was precisely this "failure"? Then he might be a genius.

This article applies the same framework to Hong Kong's stablecoin initiative, hypothesizing a top-tier "open scheme".

1. A List That Disappoints Everyone

The first batch of stablecoin licenses announced yesterday by the HKMA is the version the market least wanted to see:

Standard Chartered, HSBC; Bank of China (Hong Kong) is notably absent.

This result is disappointing. Foreign banks lack the inherent incentive to issue a Hong Kong dollar stablecoin, while entities with strategic will like Bank of China (Hong Kong) are sidelined. Important scenario players—securities firms, exchanges, internet companies—have been systematically excluded since the legislative consultation phase.

With the first licenses issued, the narrative for a Hong Kong dollar stablecoin has been sentenced to a "suspended death".

But if you were the HKMA, would you choose such a list?

You have the complete experience from the 2024 Project Ensemble sandbox, you've seen the entire case study of the digital yuan from inception to promotion, you hold the natural advantage of the SFC + HKMA dual-track system—and then you select a list that can't even achieve the most basic commercial closed loop?

Unless, this list that disappoints everyone was never intended to satisfy the market in the first place.

2. Reverse Reasoning: What if the Initial Assumption Was Wrong?

To understand this list, we need a different framework.

I've been following Jiang Xueqin's game theory series. His episode on April 2nd about Trump's Iran war left a deep impression on me:

「I understand Donald Trump『s an idiot. I understand that he』s going to lose his war in the Middle East. But let『s put our thinking caps on. Let』s use game theory and say — what if for some strange reason Donald Trump wants to lose his war in Iran? Then he『d be a genius.」

— Professor Jiang, Game Theory #18, April 2, 2026

Jiang Xueqin's argument structure is simple: If you assume Trump wants to "win", his every move is inexplicably stupid. But if you reverse the assumption—what if his goal was precisely to "lose this war", using a controlled Middle Eastern collapse to shift global energy dependence to North America—then all the seemingly idiotic actions instantly become a coherent set of strategies.

This is called Managed Collapse. It's not about avoiding failure, but engineering a failure that is advantageous to oneself.

Looking back, if you assume the goal of this licensing round is to "grow the Hong Kong dollar stablecoin industry", many details become hard to explain—licensing the least motivated institutions, setting thresholds so high they are commercially unviable, repeatedly challenging applicants' business logic, excluding the entities with the strongest strategic will.

But what if we change the assumption—what if the goal of this licensing round was never to foster the "commercial stablecoin industry" itself?

Then everything becomes coherent.

Following this hypothesis, the three lines of scenarios, institutions, and infrastructure all align.

3. Scenario Level: Three False Propositions

Every applicant tells three stories: cross-border payments, RWA, and C-end consumption.

However, none of them hold water.

A. Cross-Border Payment is a False Proposition

The typical flow is: Company A in Country A mints Stablecoin A with fiat, swaps it for Stablecoin B on a secondary market, pays Company B in Country B, which then redeems it for Fiat B. The essence is to reduce the cost of foreign exchange business, monopolized by banks, through Web3 exchanges—this is financial inclusion for SMEs, logically sound.

But in this flow, the stablecoin's lifecycle lasts only for the instant of the transfer.

Unless Company B immediately engages in another trade, it must redeem the stablecoin for fiat. What's needed is not a one-time transfer, but a closed loop where there is always a "next buyer".

Rain makes a crucial point—the Fisher Equation is even more fatal. MV = PT, where the money supply multiplied by its velocity equals price multiplied by total transactions. The velocity of stablecoins on-chain is an order of magnitude or more higher than traditional bank clearing.

This means: the required stock of stablecoins to support the same volume of trade is actually lower. The more successful cross-border payments are, the lower the demand for stablecoin deposits.

This is not a closed loop; it's an anti-loop.

B. RWA is a False Proposition

So-called RWA is essentially the same thing: tokenization of asset shares.

Fundraising is done in stablecoins, but after asset managers receive the stablecoins, they need to buy the underlying assets, and asset sellers almost never accept stablecoins—the whole point of asset securitization is to exit or optimize cash flow; no one wants stablecoins.

The result: the lifecycle of stablecoins in the RWA scenario is limited to the fundraising period.

C. C-End Consumption

In a nutshell: Hong Kong's retail market is too small to even discuss.

All three stories are false propositions. And the HKMA, as the regulator that followed the entire process, understands this better than any applicant.

So why issue licenses at all?

4. Institutional Level: A List of "Volunteers"

Neither HSBC nor Standard Chartered likely approached this with strong strategic will.

HSBC's participation might have been passive. This makes sense—HSBC's strategic focus has long shifted away from stablecoins; what it's really pushing is tokenized deposits. For HSBC, applying for a Hong Kong dollar stablecoin license is more of a defensive move than an active strategy.

Standard Chartered shows some initiative, but for them, Hong Kong is just one node in its global map. An HKD stablecoin can be integrated into its Libeara platform, but Hong Kong has never been its main battlefield.

The entity with real will and local scenarios—Bank of China (Hong Kong)—is absent.

Strange? Not at all. As long as you understand that the Hong Kong government is designing a mechanism where "volunteering" becomes the optimal choice:

Rule One: Licenses are only issued to note-issuing banks.

This immediately creates an exclusive club. If HSBC didn't apply, it would mean only Standard Chartered's name would be on the future digital track for the Hong Kong dollar. For an institution that considers "Hong Kong dollar note-issuing bank" a 160-year-old core brand asset, this is an unbearable symbolic loss. So HSBC had to follow.

Rule Two: Extremely high technical and compliance thresholds.

Building a multi-million dollar HSM data center, AML architecture, on-chain monitoring, reserve asset pools—the whole package turns stablecoin issuance into a pure cost center, not a business. Normal commercial entities would exit after calculating the ROI. But HSBC and Standard Chartered can't exit—Rule One has already locked them in.

They are not here to make money; they are here to not lose their seat.

Rule Three: Repeatedly challenging the business logic.

This is the most ingenious part. During interviews, the Hong Kong government repeatedly asked applicants the same question: Why issue your own instead of using someone else's? This essentially told applicants upfront—I don't care if you can make money. The applicants who could stay could only answer one thing: "I can help Hong Kong build and run this infrastructure."

With these three rules combined, the Hong Kong government hasn't forced anything.

HSBC and Standard Chartered "voluntarily" applied, "voluntarily" invested tens of millions of dollars, and "voluntarily" bear the costs of user education and scenario development. But each of their "voluntary" choices was the optimal choice under the rules preset by the Hong Kong government.

This is not an order; it's design.

And the absence of Bank of China (Hong Kong) is no longer strange—the entity with the strongest strategic will is actually unsuitable to be an infrastructure contractor. Entities with strong strategic will would turn the stablecoin into their own commercial product, with their own rhythm and demands. What the Hong Kong government wants is not a commercial product, but infrastructure.

Besides, Bank of China is already on another track.

5. Infrastructure Level: Leveraging Momentum to Push Something Otherwise Unpushable

What the HKMA really wants is e-HKD.

e-HKD is the Hong Kong government's central bank digital currency—Hong Kong's version of the digital yuan. The goal is clear: gradually migrate interbank clearing and retail payments to the central bank-issued, on-chain Hong Kong dollar. This is the next-generation financial infrastructure the Hong Kong government has been pushing for years, and it's the ultimate endpoint of the entire strategy.

The 2024 Project Ensemble sandbox was the first attempt on the e-HKD path: banks and the government jointly maintaining a consortium chain, tokenizing deposits, and reconstructing interbank clearing and settlement. The technology worked, but progress stalled—only HSBC and Standard Chartered were willing to join; smaller banks lacked motivation.

The reason it stalled wasn't technology; it was a lack of demand-side momentum. User education costs, scenario development costs, technical trial-and-error costs—no one was willing to pay for these three things.

A recent footnote is right here in Hong Kong. In May 2024, the digital yuan was officially connected to Hong Kong's "Faster Payment System" (FPS), becoming the world's first bilateral interconnection between a "Central Bank Digital Currency + Fast Payment System". Two years later, by March 2026, there were about 80,000 digital yuan wallets in Hong Kong, with 5,200 merchants connected and 18 local banks participating in top-ups—for a market of 7.5 million people, these are far from "widespread" numbers.

What Hong Kong residents actually use daily are still Alipay HK, WeChat Pay HK, and FPS itself.

Returning to the question from Section Four: Why is Bank of China (Hong Kong) absent from the stablecoin list? The main institution driving the digital yuan's rollout in Hong Kong is precisely Bank of China (Hong Kong). In October 2025, Bank of China (Hong Kong) partnered with Circle K and FreshUp, enabling digital yuan payments at over 380 convenience stores and 1,200 vending machines across Hong Kong.

In other words, Bank of China's strategic focus has always been on the digital yuan track. Its absence from the stablecoin list isn't an exclusion; it's simply because it's already working on something more direct.

The Hong Kong government sees this very clearly: If it relies solely on itself, e-HKD will never take off. Then came the stablecoin hype.

Stablecoins provided the Hong Kong government with something it could never create on its own: free demand-side momentum. Hype, media, KOLs, VCs, global narratives—all for free. Then the rest follows logically.

Phase One: Let licensed banks use the "commercial stablecoin" narrative to acquire users, develop scenarios, and test technology. HSBC and Standard Chartered pay out of pocket to build HSM data centers, implement KYC/AML, educate the public on using on-chain Hong Kong dollars, persuade merchants to accept it, and pilot cross-border B2B scenarios—these are all things e-HKD wanted to do but couldn't.

Phase Two: Once user habits, clearing habits, and the tech stack are established, the Hong Kong government introduces its own clearing layer as the mandatory path for interbank clearing and settlement; licensed stablecoins are incorporated into this track during the clearing process. Later, e-HKD launches as the native asset, and licensed stablecoins gradually become "upper-layer wrappers" for e-HKD.

The brands, wallets, and interfaces users see remain unchanged, but the underlying clearing has already completed the transition from commercial banks to the central bank.

This path almost mirrors the digital yuan's "two-tier operation" architecture 1:1: direct participant banks at the front end, the central bank at the back end.

The same architecture, two different paths. The difference is—China pushes top-down by force, while Hong Kong pushes bottom-up by leveraging momentum.

The Hong Kong government is using the stablecoin regulations to push e-HKD, not using e-HKD to push itself.

6. From Global Financial Center to Hong Kong Dollar Clearing Sovereignty

Hong Kong's current core assets are depreciating.

Hong Kong's status as an international financial center over the past few decades has been fundamentally built on one thing: access to the US dollar clearing system. Equity financing, interbank lending, trade settlement, private banking—all rest on this foundation.

But this asset is now eroding on three fronts simultaneously—the politicization of the US dollar system itself makes access uncertain, the sluggish return of Chinese concept stocks weakens the primary market, and geopolitical conflicts are increasing the costs of traditional correspondent banking channels.

The competition for the next generation of international financial centers is no longer about who has the larger stock market or more private banking funds, but about who controls the next-generation financial infrastructure and clearing sovereignty.

The US is using the GENIUS Act to incorporate stablecoins into the US dollar clearing system, making USDC a digital extension of the dollar. Europe is using MiCA to turn EMT into a digital version of euro clearing. China is using the digital yuan to reconstruct cross-border RMB clearing.

The three major currency zones are all doing the same thing: extracting their currency's clearing sovereignty from the SWIFT-era correspondent banking architecture and placing it into their own CBDC or stablecoin architecture.

Hong Kong does not have monetary sovereignty—under the linked exchange rate system, the issuance of the Hong Kong dollar is already tied to the US dollar. But what Hong Kong can compete for is clearing sovereignty: ensuring that Hong Kong dollar clearing no longer relies entirely on traditional SWIFT and correspondent banks, but is built on a next-generation infrastructure controlled by the HKMA.

Looking at this licensing round from this perspective, everything makes sense:

• The "commercial stablecoin" narrative was never the goal; it was a tool;
• The purpose of HSBC and Standard Chartered is to complete user education and scenario development for the Hong Kong government;
• The absence of Bank of China (Hong Kong) is not an oversight, but a way to keep strategic intentions low-key;
• VAOTC may never truly materialize, because its historical mission of fueling crypto speculation is already complete.

This is a controlled narrative downgrade—letting the superficial Web3 hype be consumed while the underlying clearing sovereignty is built.

As Jiang Xueqin says, failure is the point.

The key is who designs this "failure", and who truly takes something away from it.

7. Final Thoughts

Does Hong Kong have Web3? Thinking about our noisy past few years, it seems so. But from a historical perspective, it may never have.

What needs to be considered is, after Web3 is distilled, what remains?

In truth, Hong Kong never needed Web3—what Hong Kong needs is an entry ticket to the next generation of international financial centers.

And for this ticket, the first batch of licensed stablecoin issuers are footing the bill.

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