The Hong Kong Web3 Wave: Tech Giants Enter the Arena, Can Stablecoins Lead the Centennial Shift in Payments?

The Hong Kong Web3 Wave: Tech Giants Enter the Arena, Can Stablecoins Lead the Centennial Shift in Payments?A host of internet giants are leveraging Hong Kong to aggressively push the development of Web3 and actively enter the stablecoin market. This move reflects the quiet arrival of a century-long shift in the global payments landscape

The Hong Kong Web3 Wave: Tech Giants Enter the Arena, Can Stablecoins Lead the Centennial Shift in Payments?

A host of internet giants are leveraging Hong Kong to aggressively push the development of Web3 and actively enter the stablecoin market. This move reflects the quiet arrival of a century-long shift in the global payments landscape.

On July 18th this year, the Hong Kong Monetary Authority (HKMA) released a list of participants for its stablecoin regulatory sandbox. Aside from local players like Hong Kong Dollar Coin and Standard Chartered, mainland internet giant JD.com was prominently featured on the list. Subsequently, the Hong Kong virtual bank, Airstar Bank, a joint venture between Xiaomi Group and AMTD Group, announced a stablecoin issuer sandbox collaboration with JD.com's JD.com Coinlink Technology (Hong Kong) Limited, formally signaling JD.com's entry into the Hong Kong stablecoin market.

In fact, Alibaba, Tencent, Xiaomi, ByteDance, and even Huawei have already established a presence in this sector. JD.com's entry simply adds yet another player to the Hong Kong Web3 scene.

Traditional Payment Systems Face Challenges: The Strategic Significance of Stablecoins

The traditional global currency payment system is inseparable from the dollar-dominated clearing system. Since the emergence of the cryptocurrency market, USDT has become the consensus choice as a trading medium. However, in the Web3 era, tech giants are focusing on cross-border trade, aiming to use stablecoins to replace or partially replace traditional payment methods, even exploring more stablecoin issuance models beyond USDT.

JD.com, as a traditional internet giant, entering the stablecoin track, warrants attention to its strategic considerations, the demonstration effect it carries, and its impact on Hong Kong's Web3 development. More importantly, the stablecoin regulatory legislation consultation paper released by the HKMA in July offers a "Hong Kong solution" that is both prudent and inclusive of innovation.

Tech Giants Accelerate Their Layout in the Crypto Track: New Global Payment Rules

The uncertainty surrounding the US economy and politics, along with the increased volatility of the cryptocurrency market dominated by dollar trading, have exposed global currency flows to high risks. Stablecoins, as the "anchors" derived from cryptocurrency trading, will play a more significant role in the Web3 era.

While cryptocurrency trading is prohibited within mainland China, it is still allowed in Hong Kong and overseas markets. From a risk management perspective, it's about protecting investors from participating in cryptocurrency speculation. However, for tech giants, the payment mechanisms generated by cryptocurrency exchanges are an indispensable part of global trade rules.

In the Web3 era, whoever fails to participate in this new game will inevitably be eliminated by the market. The global daily monetary flow reaches trillions of dollars, but who dictates that such global cross-border payments must go through the US Swift system and cannot utilize stablecoin transactions? Even if stablecoin transactions account for only 5% of global currency flows, the impact on the world's monetary system will be profound.

JD.com's Entry into Stablecoins: Addressing Payment Deficiencies, Targeting the Disruptive Advantages of Cross-Border Payments

JD.com's strategic consideration for entering the stablecoin market is to address its payment shortcomings and capitalize on the disruptive advantages of stablecoins in cross-border payments.

Back in 2014, the year JD.com went public in the US, Liu Qiangdong was asked if he had ever made mistakes. He responded that his biggest mistake in JD.com's operations was not starting to do payments earlier. This "latecomer" status in the payments sector made JD.com realize that it needed to be more forward-looking in its technological strategic layout to avoid missing out on significant opportunities.

Collective Overseas Expansion by Ecommerce Giants: Efficiency Challenges and Geopolitical Risks in Cross-Border Payments

Behind JD.com's entry into the stablecoin market lies another crucial historical context: the collective overseas expansion of Chinese e-commerce giants. In the wake of the pandemic, competition in overseas markets has intensified, making cross-border payments a crucial aspect. However, efficiency challenges, geopolitical risks, and other issues continue to plague these expanding giants.

The traditional Swift system was initially built in a top-down manner. Over time, it has become increasingly bloated and complex. A single cross-border transfer process involves not only the sending and receiving banks, but also clearing banks, correspondent banks, Swift, and multiple organizations for communication, messaging, and fund transfers. In recent years, the number of correspondent banks within the global Swift system has been continually shrinking, further increasing the time and cost of cross-border settlements.

Even more concerning is the current surge in geopolitical risks, which has exposed the Swift organization to fragile partnership relations. Being excluded from the Swift system or subjected to financial sanctions would effectively mean losing the ability to connect with banks outside of one's country.

The Advantages of Stablecoin Payments: Increased Efficiency, Lower Costs, Enhanced Security

Dollar-based stablecoins like USDT and USDC are not only the bedrock of the entire Web3 industry but also the payment instruments most likely to disrupt traditional payments.

Compared to traditional payments, stablecoin transfers on blockchains can achieve payment-equals-settlement functionality, eliminating any intermediary steps.

According to the Bank for International Settlements (BIS), using stablecoins and other cryptocurrencies for cross-border payments can increase time efficiency by over 100 times and reduce transfer costs by over 10 times. Stablecoin payments pose a disruptive challenge to traditional payments in terms of speed and cost alone.

Cross-Border Expansion Scenarios: The Advantages of Web3 Payments

In the specific context of cross-border expansion, Web3 payments offer unparalleled advantages in terms of efficiency and cost. Tencent and Alibaba, leveraging their domestic advantages, have rapidly expanded into overseas markets. Both companies have actively obtained payment licenses in Malaysia, Singapore, the US, and other countries, and have already made inroads into dozens of countries and regions worldwide.

Hong Kong Web3: The Potential for a Winning "Springboard"

It can be challenging for outsiders to grasp the essence of Web3. Simply put, its common applications include cryptocurrencies, decentralized exchanges, DID identity verification, decentralized finance services (DeFi), blockchain games, NFTs, Bitcoin ETFs, and more.

JD.com is no stranger to the blockchain world. JD.com Coinlink Technology (Hong Kong) Limited (JINGDONGCoinlink), although established in March of this year, is not actually a new company. Instead, it is a rebranding of JD.com's existing asset management company in Hong Kong, which holds Hong Kong SFC licenses for types 1, 4, and 9. Around 2016, when domestic alliance chains were gaining momentum, JD.com actively participated, building the Zhizhen Chain with UnionPay. During the NFT craze, JD.com, like other tech giants, launched its NFT platform, Lingxi. Subsequent to the tightening of regulations, JD.com gradually withdrew from this space. However, JD.com is no stranger to the technology and understanding of blockchain.

While other tech giants have also exited various sectors like NFTs, they have not completely abandoned Web3 overseas, with their investments quietly extending. A significant factor in this trend is the progress toward compliance in Hong Kong, Singapore, and other regions.

In 2021, Tencent announced that Tencent Cloud would prohibit engaging in activities related to virtual currencies. Entering 2023, as regulations in Hong Kong, Singapore, Dubai, and other places became clearer, Tencent officially relaunched its support plan for the global Web3 industry at a Web3 summit held in Singapore. At the same time, it also unveiled its first four major partners: Ankr, Avalanche, Scroll, and Sui - all well-known projects in the crypto industry. In 2023 and 2024, Tencent invested in LensProtocol and Chainbase, respectively, not just as a participating investor but as the lead investor in the latter.

ByteDance announced a partnership with Sui in April 2024, marking its first foray into blockchain projects, aiming to enter Web3 through gaming and socialfi ecosystems. Looking back, TikTok, a ByteDance subsidiary, also launched NFT collections during the NFT craze.

Alibaba's involvement in Web3 is even deeper, with its entry occurring concurrently with Tencent, both embarking on a full-fledged push into Web3 in 2023. According to incomplete statistics, Alibaba has built partnerships with NEAR, Aptos, Avalanche, BNBChain, and more. Cai Chongxin, the current CEO and one of the founders of Alibaba, is a staunch supporter of Web3, and his family's Blue Pool Capital has invested in early-stage Web3 projects like FTX, Polygon, and Animoca.

Hong Kong Dollar Stablecoins Face Challenges: How to Break Through Oligopoly

For early participants like JD.com, Hong Kong Dollar Coin, and Standard Chartered, even with fiat assets denominated in US dollars as reserves, it remains a major challenge for a Hong Kong dollar stablecoin to expand its market share against the backdrop of a USD stablecoin oligopoly. This is especially true given that the Hong Kong government is simultaneously promoting the digital Hong Kong dollar while prohibiting Hong Kong dollar stablecoins from paying interest. This further differentiates the applications of the digital Hong Kong dollar and stablecoins. The former serves as the foundational credit currency tool, suitable for offline retail scenarios and more, while the Hong Kong dollar stablecoin acts as