The stablecoin sector remains a hot topic in financial markets, with multiple companies announcing plans to apply for Hong Kong's upcoming stablecoin licenses. However, significant debates persist regarding sustainable profitability models for issuers.
Dmall's Stock Surges Over 23% After License Announcement
On July 2nd, executives from Hong Kong-listed Dmall (02586.HK) revealed plans to apply for a stablecoin license in Hong Kong. This announcement triggered an 89% intraday stock price surge, closing with a 23% gain.
Dmall, founded in 2015, is China's largest retail digitalization solutions provider. The company went public on the Hong Kong Exchange in December 2024, with its market capitalization fluctuating between HK$40-200 billion.
CFO Tang Yifan stated: "We're bullish on cryptocurrency's long-term potential. Our stablecoin initiative will enhance cross-border payment efficiency for retail clients while reducing costs—aligning perfectly with global crypto adoption trends."
The company previously partnered with HashKey Group to develop digital asset solutions. Dmall's surge also lifted other Hong Kong stablecoin concept stocks, including Victory Securities (+14.51%) and Guotai Junan International (+11.56%).
👉 Discover how stablecoins are transforming global payments
Growing Competition for Stablecoin Licenses
Several major players are racing to secure Hong Kong's first stablecoin licenses when applications open August 1st under the new Stablecoin Ordinance:
- Ant International plans to apply for cross-border payment solutions
- LianLian Digital is evaluating license applications in Hong Kong and Singapore
- Three sandbox participants (including Standard Chartered consortium) are considered frontrunners
Financial Secretary Christopher Hui confirmed the regulatory timeline, emphasizing that sandbox participation doesn't guarantee license approval. The HKMA will maintain strict standards, initially approving only a handful of licenses with proven use cases and robust compliance systems.
Profitability Challenges for Issuers
While stablecoin pioneer Circle (CRCL.N) saw its stock soar 10x post-IPO, analysts question the sustainability of issuer business models:
Current Profit Model:
- Primarily earns through reserve asset yields (99% of Circle's 2024 revenue)
- Invests user deposits in short-term Treasuries for "risk-free" returns
Key Concerns:
- Interest rate sensitivity (Morgan Stanley warns of "scissors effect")
- Rising distribution costs to crypto exchanges
- Low switching costs enabling competitor disruption
- Potential margin compression from yield competition
JP Morgan analysts note: "Circle's model faces dual pressures—declining rates would reduce reserve income while distribution costs keep rising. New entrants could destabilize the current market equilibrium."
FAQ: Understanding Stablecoin Economics
Q: Why are so many companies pursuing stablecoin licenses?
A: Stablecoins bridge traditional finance and crypto ecosystems, offering companies new revenue streams and strategic positioning in digital payments.
Q: What determines a stablecoin issuer's profitability?
A: Three key factors: 1) Reserve asset yields 2) Transaction volume 3) Operational efficiency in compliance/technology.
Q: How does Hong Kong's approach differ from other markets?
A: Hong Kong is implementing clear licensing frameworks earlier than most jurisdictions, creating a regulated pathway for institutional participation.
👉 Explore the future of regulated stablecoins
The stablecoin sector stands at a crossroads—while adoption grows exponentially, issuers must prove their business models can withstand market cycles and intensifying competition. Hong Kong's regulatory clarity may provide the framework needed for sustainable growth, but only time will tell which players emerge as long-term winners in this dynamic market.