Editor’s Note: The South China Morning Post website published an article by Cobo COO Lily Z. King on May 20, which provides a depth analysis of the rise of crypto assets as “digital gold” and new financial infrastructure against the backdrop of the current fragmentation of the global economy.
In recent months, the global financial system has undergone dramatic changes, highlighting the increasingly important status of digital assets. The scale of the Bitcoin spot ETF in the United States (an exchange-traded fund that allows investors to indirectly invest in Bitcoin) has experienced explosive growth, with assets under management exceeding $120 billion, reflecting a significant shift in investor behavior.
At the same time, the trading volume of stablecoins soared to over $27 trillion last year, surpassing the total transaction volume of Visa and Mastercard. In Asia, some jurisdictions such as Hong Kong have taken the lead in issuing exchange licenses, developing regulatory frameworks for stablecoins, and approving cryptocurrency ETFs, striving to position themselves as regional hubs for the digital asset economy.
These are not isolated incidents; they reflect a broader reevaluation of the practical value of cryptocurrencies in an era of increasing economic fragmentation and uncertainty. We might call it the “paradox of uncertainty”: digital assets are moving from the fringes of speculation into the mainstream, unexpectedly becoming a hedging tool against systemic risks.
As governments around the world set up trade and capital flow barriers, blockchain is quietly building a “highway” to promote global capital movement. Gold remains a traditional safe-haven asset, but it cannot complete cross-border transactions in minutes, nor can it bypass financial system restrictions during a crisis.
The enthusiastic response of investors to Bitcoin spot ETFs indicates the appeal of the concept of “digital gold.” When U.S. regulators approved such products last January, many skeptics predicted a lukewarm market reaction. However, the reality is that BlackRock’s iShares Bitcoin Trust (IBIT) has rapidly grown, with assets under management exceeding $65 billion, making it the largest Bitcoin spot ETF in the world.
Beyond the narrative of “digital gold,” the true revolutionary significance of cryptocurrency lies in its ability to construct a new financial system independent of traditional financial intermediaries. At the core of this system are stablecoins: blockchain tokens pegged to fiat currencies such as the US dollar.
The stablecoin market has quickly expanded from 2 billion dollars in 2019 to a current circulation scale of over 200 billion dollars, becoming an indispensable financial tool in markets where local currencies are unstable or cross-border capital flows are restricted.
The business community has keenly sensed this trend. In October last year, Visa launched the “Visa Tokenised Asset Platform” to help banks issue and manage fiat-backed digital tokens; last month, fintech company Stripe began testing stablecoin payment solutions in emerging markets, making it easier for businesses to access dollars through digital tokens. Mastercard also introduced new features supporting stablecoin transactions.
Cryptocurrency, as both a hedging tool and an innovative platform, is most vividly embodied in Hong Kong. In a very short period, Hong Kong has transformed from a cautious observer to a leader in the global cryptocurrency regulation and application field.
Since 2020, the Hong Kong Securities and Futures Commission (SFC) has issued licenses to 10 virtual asset trading platforms, bringing cryptocurrency trading by individual investors and institutions under regulatory oversight. As Hong Kong’s Financial Secretary Paul Chan mentioned at a recent Web3 event, this move aligns with Hong Kong’s strategy of building a “vibrant digital asset ecosystem” and also strengthens investor protection mechanisms.
! Hong Kong Financial Secretary Paul Chan Mo-po speaks at the opening of Consensus, Coindesk’s flagship cryptocurrency event, at the Convention and Exhibition Centre in Hong Kong on February 19, the first time Consensus was held outside the US in five years. Photo: AFP
On February 19, 2025, the Financial Secretary of Hong Kong, Paul Chan, attended the opening ceremony of the Consensus conference organized by Coindesk at the Hong Kong Convention and Exhibition Centre. This is the first time in five years that this heavyweight conference in the encryption industry has been held outside the United States.
Hong Kong has adopted a multi-faceted and pragmatic approach. In April last year, Hong Kong became one of the first jurisdictions in the world to launch Bitcoin and Ethereum spot ETFs. In December last year, the Hong Kong government introduced a stablecoin bill that requires issuers of fiat-pegged stablecoins to maintain sufficient reserves and protect users’ redemption rights, establishing one of the world’s most advanced stablecoin regulatory frameworks.
At the end of November last year, the Hong Kong Financial Services and the Treasury Bureau released a consultation document proposing to exempt hedge funds, private equity funds, and family offices from taxes on the earnings from encryption and other alternative assets, clearly signaling the strategic intention to establish Hong Kong as a digital asset hub amid the tense relations between the East and the West.
This development momentum has continued to heat up this year. In February 2025, the Hong Kong Securities and Futures Commission (SFC) released a regulatory roadmap containing 12 measures aimed at further promoting the development and security of the virtual asset industry. The roadmap includes a licensing system for over-the-counter (OTC) trading and encryption asset custody, as well as a more comprehensive insurance and compensation mechanism for virtual asset service providers.
The Hong Kong case is particularly important because of its dual strategic value. First, the development of a strong digital asset industry can serve as a financial hedge against global financial fragmentation and uncertainty, while reducing Hong Kong’s dependence on the traditional banking system that may be influenced by the politics of major powers. If there is a split in the international financial system in the future, Hong Kong can still rely on cryptocurrency infrastructure, including stablecoins, to continue to provide a channel for capital flows.
Secondly, the development of the digital asset industry has also become an important engine for promoting financial innovation and long-term competitiveness. Hong Kong has not only issued the world’s first government-led tokenized green bond but has also launched a pilot project for e-HKD to explore the development path of central bank digital currency. At the same time, local banks and fintech companies are actively piloting the application of blockchain in scenarios such as credit, trade financing, and clearing and settlement.
In an era of dramatic changes in the global alliance landscape, Hong Kong’s positioning in cryptocurrency is not only a risk hedge but also a strategic investment in future financial leadership.
As the global economy becomes increasingly fragmented, with rising tariff barriers and traditional alliances shaking, the market’s demand for borderless, neutral financial instruments is also growing rapidly. As a product born out of the backdrop of the 2008 global financial crisis, encryption assets are designed to address the uncertainties of such an era.
The next financial shock—whether it be a currency crisis, data channel blockade, or weaponization of payment networks—will test the maturity of these alternative financial channels. However, various signs are emerging: capital is accelerating its inflow, institutions are adapting, and regulatory pioneers like Hong Kong are consciously advancing their strategies.
We may be standing at the starting point of a historic reconstruction of reserve assets. It is not meant to replace the US dollar, but to hedge against its limitations - a low-key advancement, gradually moving towards a mainstream alternative.
