The Stablecoin Bill in Hong Kong and the Genius Act in the US move ahead of the curve, pointing not just to a local issue but a global trend and a possible path to national economic stabilization. The Genius Act in the US is progressing rapidly but is not yet finalized and faces criticism – while the Stablecoin Bill in Hong Kong has already been passed and will come into force on August 1, 2025. Will Hong Kong be the first to fully regulate stablecoins in Asia, will they outpace the US, and why might this matter more than it seems?
Hong Kong Stablecoin Bill – Goals and Key Features
The Hong Kong Stablecoin Bill appears relatively straightforward and proposes a framework that could be described as standard provisions and requirements. It establishes a licensing regime for all issuers of fiat-referenced stablecoins (FRS) and mandates:
- full reserve backing
- redemption at par value upon request by the holder
- segregation of client assets
- compliance with AML/CFT, audit, disclosure, and fitness and propriety requirements
In addition, FRS may only be offered to retail investors through licensed issuers, and advertising for such tokens will be allowed only after a minimum non-contravention period. The Hong Kong government explicitly states the goal of the laws: ensuring financial market stability, user protection, and the development of virtual assets (VAs).
Key officials describe them as follows. The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said:
“The Ordinance adheres to the ‘same activity, same risks, same regulation’ principle, with a focus on a risk-based approach to promote a robust regulatory environment. This is not only in line with international regulatory requirements,but also lays a solid foundation for Hong Kong’s virtual asset market, which, in turn, promotes the sustainable development of the industry, protects users’ rights and interests, and strengthens Hong Kong’s status as an international financial center.”
Also, The Chief Executive of the Hong Kong Monetary Authority, Mr Eddie Yue, said:
“The Ordinance has established a risk-based, pragmatic, and flexible regulatory regime. We believe that a robust and fit-for-purpose regulatory environment would provide favorable conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and the broader digital asset ecosystem.”
Genius Act in the US – Has It Set a Global Trend or Simply Found the Suitable Instrument?
The Genius Act is also specifically designed to regulate stablecoins, and if or when it is passed, companies like Tether and USDC will be required to hold real reserves in the form of US dollars. In other words, it will no longer be enough to simply promise that they do this – they will be required to hold them without exception.
But the question here is – why has Hong Kong already passed a similar bill, while the US has not? Moreover, if they wanted to protect investors – they were the first who experience major events like the collapse of FTX and Terra Luna, in many ways, due to the lack of such regulation. But is the Genius Act aimed solely at protecting the industry and investors from such events? Let’s try to ask the question critically – if it can be done as fast as Hong Kong, it could likely have been done earlier. But all regulators ever tried to do was ban cryptocurrencies, not make them safer.
Perhaps the Genius Act brings not only obvious changes, but also is not what it seems at first glance. Assuming that the issuing company – for example, Tether – indeed reserves its funds relative to the US dollar – that’s not where it ends. The company doesn’t simply hold dollars in reserve but purchases stable income-generating assets, which are usually US government debt instruments.
And this is a critical point – think about it: when you buy USDT, you think it’s a stable cryptocurrency backed by the US dollar, but at the same time, your dollars are already being used to buy US debt. So the cryptocurrency that was created as an attempt to move away from the old financial system is literally being used to serve the interests of the US Federal Reserve. This means this isn’t just about crypto adoption and investor protection – it’s about integrating cryptocurrencies into the old financial system with its vulnerabilities such as classic financial crises, manipulation, uncontrolled issuance, and volatile inflation.
But if this doesn’t solve any problems, then why integrate it, you may ask? Yet if you think about it a bit more, it could solve problems – but not ours as investors, rather the problems of US national debt. Under the Genius Act, Stablecoins may become a quiet tool for redirecting liquidity into the US debt system because, unlike traditional financing instruments like Treasury auctions or institutional placements, demand for Stablecoins is created by millions of users seeking a”stable” digital asset.
At the same time, each new dollar invested in USDT or USDC is automatically converted into a Treasury bond purchase through reserve mechanisms. In this way, the US national debt gets a permanent, stable, and unquestioning buyer – a retail crypto market user who might not even realize they are participating in refinancing the budget deficit. This may be the key to understanding the Genius Act, which not only introduces reserve requirements but turns the crypto market into a mechanism for centralized financing.
Therefore, Stablecoins may become a double-edged sword for crypto investors and crypto enthusiasts, and as a result, truly decentralized cryptocurrencies may become increasingly important in the future. Naturally, Bitcoin shines the brightest in this sense, but this may also apply to other cryptocurrencies backed by a DAO rather than a centralized issuing company.
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Okay, that’s an interesting theory – but where are the numbers that clearly show the government really needs this? Unfortunately, they exist. Recently, US Treasury Secretary Scott Bessent stated that Stablecoins will create $2T in demand for US Treasury bonds – which is twice as much as what the largest foreign buyer of US Treasuries today – Japan– holds.
And this is no accident because although this news has faded into the background amid many other important events, demand for US Treasuries is at a record crisis. What does this mean? Investors are dumping US debt instruments because they fear whether the economy is even capable of servicing this debt. And those fears and resulting rejection of purchases make it genuinely harder for the US to service it.
Do you remember the recent conflict between Elon Musk and Donald Trump, and the fact that the budget deficit was not reduced fully? Additionally, GDP alone was not enough to cover the national debt? So this seemingly hopeless situation may potentially be resolved through the adoption of Stablecoins – or, more precisely, through regulatory measures based on the Genius Act.
Conclusion
Are stablecoins about investor protection and financial stability, or are they a new instrument now being deployed by the state? Possibly both. The real question is, what will the balance be in Hong Kong and the United States? And will this trigger increased demand for truly decentralized assets? Will Bitcoin be the first to respond, as the most prominent example? These questions are closely intertwined and may very well end up influencing each other directly. Stay with us to always keep up with the latest developments in finance, crypto, and blockchain.
