The stablecoin narrative remains one of the most compelling in the digital asset space, drawing increasing interest from traditional businesses and financial institutions. Recent developments in Hong Kong have reignited investor enthusiasm, with multiple companies signaling their intent to enter the regulated stablecoin market. While the regulatory framework is nearing completion and market momentum is building, questions persist about the long-term profitability and sustainability of stablecoin issuance models.
Market Reaction: DMALL’s Surge Sparks Broader Interest
On July 3, DMALL (02586.HK), a Hong Kong-listed technology firm specializing in retail digitalization, saw its stock price surge nearly 90% intraday before closing up over 23%. This dramatic move followed an announcement by the company’s CFO, Tom Yip, that DMALL plans to apply for a stablecoin issuer license under Hong Kong’s upcoming regulatory regime.
Founded in 2015, DMALL is recognized as China’s leading provider of retail digital solutions based on revenue and gross merchandise value in 2023, according to Frost & Sullivan. The company went public in December 2024 and has since experienced significant volatility, with its market capitalization fluctuating between HK$4 billion and HK$20 billion.
Yip emphasized that DMALL sees strategic value in cryptocurrencies, having already allocated capital to Bitcoin and hired Web3 specialists. He highlighted that stablecoins could enhance cross-border payment efficiency for its retail clients, reduce transaction costs, and improve customer experience—aligning with the broader trend of crypto adoption in global commerce.
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DMALL’s announcement didn’t just boost its own shares—it sparked a rally across other Hong Kong-listed stocks associated with the stablecoin theme. Victory Securities (08540) rose 14.51%, Guotai Junan International (01788) gained 11.56%, and China Everbright Limited (00165) climbed 3.41% by market close.
Regulatory Milestone: Hong Kong’s Stablecoin Framework Takes Shape
Hong Kong’s Financial Services and Treasury Bureau announced that the Stablecoin Issuance Regulation will come into effect on August 1, 2025, at which point the Hong Kong Monetary Authority (HKMA) will begin accepting license applications. The HKMA is currently conducting market consultations to finalize implementation guidelines.
Although formal applications are not yet open, competition for early approval is intense. While no official timeline has been set for the first approvals, industry watchers expect only a limited number of licenses to be issued initially.
In 2024, the HKMA launched a regulatory sandbox program for stablecoin issuers, selecting three groups from more than 40 applicants:
- JD Blockchain Tech (Hong Kong)
- Circle Innovation Technology
- A consortium comprising Standard Chartered Bank, Anthill Group, and Hong Kong Telecom
These participants have been testing issuance processes and business models in a controlled environment. According to industry insiders, their familiarity with compliance requirements gives them a strong advantage in the licensing race.
However, HKMA Chief Executive Eddie Yue clarified that sandbox participation does not guarantee future licensing. All applicants—whether inside or outside the sandbox—will be evaluated against the same rigorous standards. Priority will be given to those with viable use cases, robust reserve management systems, strong compliance infrastructure, and proven technical security protocols.
The Profitability Puzzle: Can Stablecoin Issuers Truly Scale?
Despite growing institutional interest, the long-term profitability of stablecoin issuers remains uncertain. The case of Circle (CRCL.N), often dubbed the “first stablecoin IPO,” offers valuable insights—and warnings.
Circle’s USDC has become one of the most widely used dollar-pegged tokens globally. After its public listing, the stock surged nearly tenfold at one point, reflecting investor optimism. However, scrutiny has grown over its business model.
According to Circle’s 2024 prospectus, the company generated $1.676 billion in total revenue, with $1.661 billion—99%—coming from reserve income. This income is primarily earned by investing user deposits in short-term U.S. Treasury securities.
As noted by Guosen Securities analyst Liu Xi, “Circle’s model hinges on issuing USD-pegged USDC and deploying the backing cash into low-risk government bonds to capture interest spreads.”
Yet this model faces mounting criticism:
- Interest rate sensitivity: Revenue fluctuates with monetary policy shifts. A falling interest rate environment directly reduces yield on reserves.
- Rising distribution costs: Fees paid to crypto exchanges and payment platforms to promote USDC usage are increasing.
- Profit margin pressure: JPMorgan analysts warn of a “squeezing scissors effect” where declining yields meet rising costs, eroding margins.
- Low switching costs: Users can easily shift between stablecoins like USDT, USDC, or emerging regulated alternatives.
- Competitive threats: New entrants may offer higher yields or better integration, threatening Circle’s dominance.
JPMorgan cautioned that if market concentration weakens and the “winner-takes-most” dynamic breaks down, Circle’s economic moat could rapidly diminish.
Frequently Asked Questions (FAQ)
Q: What is a stablecoin?
A: A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset like the U.S. dollar, euro, or gold. It combines blockchain efficiency with price stability.
Q: Why are companies applying for stablecoin licenses in Hong Kong?
A: Hong Kong is establishing a clear regulatory framework for stablecoins, making it an attractive hub for compliant digital asset innovation. Early movers may gain first-mover advantages in cross-border payments and institutional adoption.
Q: How do stablecoin issuers make money?
A: Most earn interest by investing user deposits in safe assets like U.S. Treasuries. However, this model depends heavily on interest rates and faces challenges from rising operational costs and competition.
Q: Is investing in stablecoin-related stocks risky?
A: Yes. While regulatory clarity can drive short-term gains, long-term performance depends on real-world adoption, sustainable revenue models, and macroeconomic factors like interest rates.
Q: Will only sandbox participants get approved?
A: No. While sandbox experience helps, the HKMA has stated all applicants will be assessed equally based on preparedness, compliance, and business viability.
Q: Can stablecoins replace traditional payment systems?
A: They have potential—especially for cross-border transactions—but widespread adoption requires trust, regulation, interoperability, and integration with existing financial infrastructure.
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Strategic Outlook: Beyond Speculation to Real Utility
While speculative rallies like DMALL’s remind us of market sentiment’s power, sustainable success in the stablecoin space will depend on delivering tangible utility. Companies must move beyond branding exercises and focus on solving real problems: faster settlements, lower remittance fees, seamless e-commerce integration, and programmable money for smart contracts.
Regulated stablecoins could become foundational rails for tokenized assets, central bank digital currencies (CBDCs), and decentralized finance (DeFi). But profitability will require innovation—not just in finance, but in compliance automation, risk modeling, and user experience.
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As Hong Kong prepares to issue its first licenses, the world will be watching—not just for who gets approved, but how these pioneers build businesses that last beyond the hype cycle. The race isn’t just about being first; it’s about being sustainable.