Editor's Note: The South China Morning Post website published an article by Cobo COO Lily Z. King on May 20, providing an in-depth analysis of the rise of crypto assets as "digital gold" and a new financial infrastructure against the backdrop of global economic fragmentation.
In recent months, the global financial system has undergone earth-shattering changes, highlighting the increasingly important position of digital assets. The scale of the US Bitcoin spot ETF (an exchange-traded fund that allows investors to indirectly invest in Bitcoin) has grown explosively, with assets under management breaking through $120 billion, reflecting a massive shift in investor behavior.
Meanwhile, stablecoin trading volume soared to over $27 trillion last year, surpassing the total transaction volume of Visa and Mastercard. In Asia, some jurisdictions like Hong Kong have taken the lead by issuing exchange licenses, establishing stablecoin regulatory frameworks, and approving crypto ETFs, striving to build themselves into regional hubs of the digital asset economy.
These are not isolated events, but reflect a broader market reassessment of the practical value of cryptocurrencies in an era of increasing economic fragmentation and uncertainty. We might call this the "paradox of uncertainty": digital assets are moving from the edge of speculation towards the mainstream, unexpectedly becoming a hedge against systemic risks.
As governments erect barriers to trade and capital flow, 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, let alone bypass financial system restrictions during a crisis.
The enthusiastic response to Bitcoin spot ETFs demonstrates the appeal of the "digital gold" concept. When US regulators approved such products last January, many skeptics predicted a lukewarm market reaction. However, BlackRock's iShares Bitcoin Trust (IBIT) quickly developed, with assets under management exceeding $65 billion, becoming the world's largest Bitcoin spot ETF.
Beyond the "digital gold" narrative, the truly revolutionary significance of cryptocurrencies lies in their ability to construct a new financial system independent of traditional financial intermediaries. At the core of this system are stablecoins: blockchain tokens anchored to fiat currencies like the US dollar.
The stablecoin market has rapidly expanded from $2 billion in 2019 to over $200 billion in circulation today, becoming an indispensable financial tool in markets with unstable local currencies or limited cross-border capital flows.
The business world has keenly noticed this trend. In October last year, Visa launched the "Visa Tokenised Asset Platform" to help banks issue and manage digital tokens anchored to fiat currencies. Last month, fintech company Stripe began testing stablecoin payment solutions in emerging markets, making it easier for businesses to obtain US dollars through digital tokens. Mastercard has also introduced new features supporting stablecoin transactions.
The dual role of cryptocurrencies as a hedging tool and innovation platform is most vividly embodied in Hong Kong. In an extremely short time, Hong Kong has transformed from a cautious observer to a leader in global crypto regulation and application.
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 Financial Secretary Paul Chan said at a recent Web3 event, this move both aligns with Hong Kong's strategy to build a "vibrant digital asset ecosystem" and strengthens investor protection mechanisms.
On February 19, 2025, Hong Kong Financial Secretary Paul Chan attended the opening ceremony of the Consensus conference hosted by Coindesk at the Hong Kong Convention and Exhibition Centre. This is the first time in five years that this heavyweight crypto industry conference has been held outside the United States.
Hong Kong is adopting a diverse and pragmatic strategy. In April last year, Hong Kong became one of the first jurisdictions to launch Bitcoin and Ethereum spot ETFs. In December, the Hong Kong government introduced a stablecoin bill requiring issuers of fiat-anchored stablecoins to maintain sufficient reserves and guarantee user redemption rights, constructing one of the world's most advanced stablecoin regulatory frameworks.
In late November last year, the Hong Kong Financial Services and the Treasury Bureau issued a consultation document proposing tax exemptions on crypto and other alternative asset gains for hedge funds, private equity funds, and family offices, clearly signaling the strategic intention to build Hong Kong into a digital asset hub amid tense China-West relations.
This momentum has continued to heat up this year. In February 2025, the Hong Kong SFC released a regulatory roadmap containing 12 measures aimed at further promoting the development and safety of the virtual asset industry. The roadmap includes licensing systems for over-the-counter (OTC) trading and crypto asset custody, as well as more comprehensive insurance and compensation mechanisms for virtual asset service providers.
The Hong Kong case is particularly important due to its dual strategic value. First, developing a strong digital asset industry can serve as a financial hedge against global financial fragmentation and uncertainty, while reducing Hong Kong's dependence on traditional banking systems that might be affected by great power politics. If the international financial system becomes divided into camps, Hong Kong can still provide channels for capital flow through crypto infrastructure, including stablecoins.
Secondly, developing the digital asset industry has become an important engine for driving financial innovation and long-term competitiveness. Hong Kong has not only issued the world's first government-led tokenized green bond but also launched the e-HKD pilot project to explore the development path of central bank digital currencies. Meanwhile, local banks and fintech companies are actively piloting blockchain applications in scenarios such as credit, trade finance, and clearing and settlement.
In an era of dramatically changing global alliance patterns, Hong Kong's crypto layout is not just a risk hedge but a strategic investment in future financial leadership.
As the global economy becomes increasingly fragmented, with rising tariff barriers and traditional alliances wavering, the market's demand for borderless, neutral financial instruments is also growing rapidly. Born in the context of the 2008 global financial crisis, crypto assets were designed precisely to address such an uncertain era.
The next financial shock—whether a monetary crisis, data channel blockade, or payment network weaponization—will test the maturity of these alternative financial channels. But signs are emerging: capital is accelerating inflow, institutions are adapting, and pioneering regulators like Hong Kong are consciously advancing their layout.
We may be standing at the starting point of a historic reconstruction of reserve assets. Not to replace the US dollar, but to hedge its limitations—a low-key, gradually mainstreaming alternative.
