Financial encyclopedia

The Stablecoin Ordinance of Hong Kong will come into effect on August 1 this year. As stablecoins have drawn increasing attention, a question has emerged in the market: Will stablecoins pose a "fatal threat" to traditional banks? And how will banks respond to this financial revolution? 

Why do stablecoins threaten banks? 

Stablecoins are digital tokens pegged 1:1 to fiat currencies such as the US dollar and the euro, like Tether (USDT) and USDC. Over the past few years, stablecoins have increasingly been used for: 

Cross-border payment is faster and cheaper than traditional remittance. 

Funds stored in value → Reduce the risk of currency fluctuations 

Transaction settlement → Serving as a "stable unit" in the crypto market or tokenized assets 

If the function becomes increasingly popular, banks may be impacted. 

Deposit business 

When funds are transferred to stablecoins, banks lose their deposit sources, which affects their lending and interest income. 

Remittance and cross-border payment 

Traditional cross-border transfers are slow and expensive; stablecoins can be transferred instantly with only a few cents in fees. If banks fail to catch up, they will inevitably lose customers. 

The role of the capital market 

If securities trading were settled with stablecoins, banks might lose their roles in settlement, clearing and custody. 

Will banks be phased out? 

Although there are threats, it is still too early to say that stablecoins can "eliminate" banks. The reasons include: 

Trust Advantage 

Banks have a long-standing reputation for regulation and legal protection, while the transparency of stablecoins remains questionable. 

Regulatory environment 

The threshold for stablecoin issuance has been raised, and banks themselves already have a well-established regulatory framework. 

How should banks respond? 

Banks are not sitting idly by but have taken proactive measures: 

Explore Your Own Stablecoin 

For instance, JPMorgan Chase launched JPM Coin for internal clearing or large client transactions. 

Become a stablecoin custodian 

Provide custody services for crypto assets to institutions or high-net-worth clients. 

Assist in the development of CBDC 

Central banks of various countries are developing digital currencies, and banks can become issuance and circulation nodes. 

Stablecoins do pose challenges to banks, especially in the areas of cross-border payments and settlements. However, in the short term, banks still hold advantages in terms of trust, regulation, and capital pools. The future may not be about "replacing", but rather coexistence and even complementarity. 

For investors, this upheaval is not merely a technological race but may also rewrite the financial landscape. The allocation between stablecoin concept stocks and financial stocks will become a new issue.