How Hong Kong’s fintech strategy is progressing – and where growth still lags

Hong Kong has touted rapid progress in the first year of its five-year fintech strategy, pledging to double down on artificial intelligence and tokenisation even as many initiatives face the challenge of achieving commercial scale.

Tokenisation, for instance, had moved from the sandbox “into the real world”, said Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority (HKMA), at the city’s annual FinTech Week conference on Monday.

Hong Kong had authorised 17 tokenised public funds and bonds, with a combined volume of US$1.3 billion, up 34 per cent from a year earlier, Securities and Futures Commission CEO Julia Leung Fung-yee said at the event.

The HKMA also announced it would advance its tokenisation sandbox, Project Ensemble, into “a new stage”, in which tokenised central bank money would serve as a “foundation layer” for round-the-clock cross-border settlement.

The city unveiled its first five-year fintech strategy, Fintech 2030, at FinTech Week last year, pledging to advance AI and tokenisation in financial services while strengthening its position as a fintech hub.

The strategy focuses on four priorities: boosting the city’s data and payment infrastructure, driving “comprehensive and responsible” AI adoption in financial services, enhancing cybersecurity resilience, and accelerating tokenisation use cases.

“A lot of progress has already been made in just one year,” Yue said at a media briefing.

The HKMA on Monday also launched Project Sage, an initiative focused on the use of AI agents in financial services. It would bring together a cross-sector industry panel to advance agentic AI use cases and improve governance, Yue said.

The city’s de facto central bank announced plans to prepare the financial sector for looming cybersecurity threats from quantum computing, saying that it was targeting “full readiness” by 2030.

It also said it was advancing cross-border payments. By the end of the year, it planned to roll out a link between Hong Kong’s Faster Payment System (FPS) and mainland China’s UnionPay International, allowing FPS users to make payments in popular overseas destinations such as Japan and Taiwan by scanning merchant QR codes, the HKMA said.

Hong Kong has stepped up efforts in recent years to develop its digital asset sector. After finalising regulatory frameworks – including licensing regimes for crypto exchanges, stablecoin issuers and advisory firms – government officials said in April that the city’s “momentum had never been stronger” and that it should now aspire to expand its “global influence”.

The city’s ambitions, however, face reality checks as high compliance costs weigh on market growth.

One of Hong Kong’s biggest challenges now was “managing the transition from establishing a robust regulatory foundation to driving commercial market activity”, said Robert Lui, Hong Kong digital asset leader at Deloitte China.

The city’s current digital asset framework reflected a “strategic choice” to prioritise financial stability and investor protection over volume growth, Lui said, adding that the next step should be to attract greater global institutional scale.

Hong Kong’s stablecoin development trajectory, for instance, underscores a major gap between the city’s regulations and market activity. More than US$182.8 billion of global US dollar-backed stablecoins were issued from El Salvador and US$79.4 billion from the US, while Hong Kong accounted for only about US$305 million, according to a new report published on Monday by blockchain data provider OnChain Benchmark.

Combined with Singapore’s US$3.2 billion, the Asia-Pacific region accounted for only 1.2 per cent of global US dollar-backed stablecoin issuance.

“When a region’s dollars are issued elsewhere, so are the reserves, the redemption terms and the crisis response,” the report said. “If USDT stumbled, no Asian stablecoin regulator would be the one in charge.”

USDT is the largest US dollar-backed stablecoin by market volume.

Hong Kong has so far granted stablecoin issuer licences to only two firms, Standard Chartered-backed Anchorpoint Financial and HSBC.

While Anchorpoint has focused on institutional use cases for its Hong Kong dollar-backed stablecoin, including enterprise payments and subscriptions to tokenised funds, HSBC last week made its own Hong Kong dollar-backed stablecoin, RedCoin, available to consumers through its PayMe mobile wallet.

RedCoin had attracted 50,000 users since its launch, HSBC Group CEO Georges Elhedery said on Monday.

For some industry participants, the future of Hong Kong dollar-backed stablecoins lies not in competing with major US dollar-backed stablecoins, but in improving Hong Kong dollar-based trade settlement.

Jennifer Wu, a Hong Kong partner at law firm Holman Fenwick Willan, said Hong Kong dollar-backed stablecoins “would not be a replacement” for popular US dollar-backed stablecoins such as USDT and USDC, but would instead “provide ease of cross-border payments for those already trading” in Hong Kong dollars.

“In specific corridors, such as trade between Hong Kong and other Asian markets, including along the belt and road, Hong Kong dollar-backed stablecoins could offer a practical alternative,” Wu said.

Going forward, the outlook for Hong Kong’s fintech industry remained positive if the city could use the next five years to integrate fintech more deeply into mainstream finance, said Kristi Swartz, a partner at global law firm DLA Piper.

The opportunity lay in connecting areas such as tokenisation, digital assets and payments with Hong Kong’s existing strengths as an international financial centre, rather than treating fintech as a separate ecosystem, she added.