Paul Chan's Budget sets the tone: Stablecoin license in March, legislation within the year, Hong Kong rolls out three measures for RWA

Written by: Liang Yu

Edited by: Zhao Yidan

Hong Kong Economic Journal, February 25th — Hong Kong Financial Secretary Paul Chan delivered the government’s “Budget Proposal” for the 2026-2027 fiscal year in the Legislative Council. The chapter on digital asset development sent a more systematic policy signal: a draft licensing regime for digital asset trading and custody providers will be submitted within the year; the first licenses for fiat-backed stablecoin issuers will be issued next month; the Securities and Futures Commission (SFC) will further enhance market liquidity and offer more products and services for professional investors; and an accelerator will be established to promote market innovation.

On February 26, 2026, Dering Holdings Group Limited issued an announcement that stirred ripples in Hong Kong’s digital asset market. The listed company announced it received a no-objection letter from the Hong Kong Securities and Futures Commission (SFC) regarding its RWA tokenization plan, officially advancing the tokenization and distribution of Dering Tower and Animoca Brands LPF.

The case of Dering Holdings and the top-level design of the SAR government form a subtle resonance at this moment. For those long focused on the RWA (Real-World Asset) track, these two pieces of news together outline not only Hong Kong’s determination to accelerate building a digital asset hub but also a systemic approach to overcoming RWA development bottlenecks.

The narrative of RWA has been told for years—from US Treasuries to Hong Kong hotel rooms, from real estate to private equity shares. The concept is appealing, but it has long been stuck at the “three gates”: who will handle compliant custody? what will be used for stable trading? where will liquidity come from? Dering Holdings’ need to submit a business plan to the SFC and wait for a no-objection letter highlights the importance of a compliant pathway; meanwhile, the three measures in Paul Chan’s budget proposal—trading/custody licenses, stablecoin issuance licenses, liquidity enhancement, and accelerators—precisely knock on these three doors.

This is not merely regulatory patching but a tailored “infrastructure startup kit” for RWA. Hong Kong is attempting to transform RWA from a conceptual stage into a scalable new asset frontier through regulatory rules.

First move: compliant custody to solve “who will safeguard assets” trust issue

Before understanding Hong Kong’s upcoming digital asset custody licensing regime, it’s necessary to revisit a fundamental dilemma faced by the RWA track: where does trust come from?

In traditional finance, asset custody is a highly mature professional service. Stocks, bonds, real estate deeds are held by regulated custodians, with clear separation of ownership and custody responsibilities. In the RWA world, this separation has been difficult to realize. Many RWA projects adopt a model where the project team holds the legal certificates of underlying assets and the private keys for token minting. The tokens held by investors rely entirely on the project team’s unilateral promise for their legal validity.

This model is almost unacceptable to mainstream institutional funds seeking compliance. Pension funds, family offices, insurance companies considering entering the RWA market always ask: who will custody the underlying assets? who will ensure the legal rights associated with the tokens are genuine and not misappropriated?

Dering Holdings’ case offers an observation window. The company’s announcement shows its RWA tokenization plan involves the tokenization of fund interests in Dering Tower LPF and Animoca Brands LPF. The Hong Kong SFC’s no-objection is contingent on Dering Securities acting as the recommended distributor for RWA tokens, establishing necessary operational infrastructure and onboarding processes; Dering Digital Family Office continues to implement the tokenization plan, using blockchain technology to represent fund interests in token form. Throughout this process, the no-objection letter from regulators acts as a “trust certification.”

Paul Chan explicitly states in the budget that the government will submit a bill within the year to establish a licensing regime for digital asset trading and custody service providers. This means that future digital asset custody services in Hong Kong will require a specific license and be subject to regulation at the same level as financial institutions.

This system’s implementation will fundamentally change the trust foundation of RWA. Imagine a licensed custodian regulated by the SFC holding the legal ownership documents of underlying properties in an RWA real estate fund, and following strict operational procedures, minting corresponding tokens on the blockchain. Investors buy these tokens on licensed exchanges, with their holdings recorded on-chain, while their legal rights are protected by the licensed custodian’s compliant operations.

This extends the traditional financial principle of “separation of ownership and custody” into the digital age. The emergence of licensed custodians effectively introduces a regulated “digital asset custody bank” for RWA. For institutional investors, this means a significant increase in legal clarity—they no longer need to rely solely on project teams’ statements but can depend on the compliant operations of licensed institutions and ongoing regulatory supervision.

It’s worth noting that Hong Kong’s Monetary Authority launched the Ensemble project’s pilot phase last November, allowing industry participants to test tokenized deposits and real transactions in a controlled environment. This sandbox exploration provides valuable experience for custody institutions to test systems and refine processes in real trading scenarios. The budget proposal’s mention of “continuous system optimization, support for 24/7 settlement, and alignment with local standards to enhance Hong Kong’s interoperability with other markets” shows Hong Kong’s focus on cross-border connectivity and international standards from the outset of building digital asset infrastructure.

From “private key as custody” self-custody to “private key + legal certificate” dual-affirmation, and now to future compliant custody by licensed institutions, the trust foundation of RWA is undergoing a qualitative leap. When mainstream funds no longer worry about asset security, RWA can shift from marginal innovation experiments to a scalable asset class.

Second move: compliant stablecoins to connect RWA’s “payment and settlement” channel

If custody licenses address “asset safety,” then stablecoins solve “how assets are traded.” The ultimate vision for RWA is a closed-loop on-chain finance, enabling real-world assets to circulate freely in the digital realm, with efficient pricing and automatic settlement. This requires a stable, compliant “anchor” to connect the fiat currency system with digital value exchange.

This “anchor” is fiat-backed stablecoins.

Paul Chan announced in the budget that Hong Kong has implemented a licensing regime for fiat-backed stablecoin issuers, with the first licenses to be issued next month (March 2026). This means Hong Kong will soon see a number of licensed stablecoin issuers regulated by the HKMA, pegged to HKD or other legal tender.

Market reactions were swift. On February 25, Hong Kong’s stablecoin concept stocks surged collectively, with Lionteng Holdings up over 17%, Lianlian Digital nearly 6%, and others like ZhongAn Online and Guotai Junan International also rising. The market’s sensitivity reflects investor expectations that compliant stablecoins will bring new business opportunities.

For RWA, the significance of compliant stablecoins goes far beyond adding another cryptocurrency.

First is valuation. The value of any asset needs a stable unit of measurement. If a tokenized Hong Kong government bond is priced in HKD but traded in a highly volatile cryptocurrency, traditional investors will find it troublesome. Compliant stablecoins can provide a clear, fiat-pegged valuation unit, making the product’s value expression straightforward.

Second is payment. RWA products often involve dividends, interest, redemptions, and other cash flows. If these are processed through traditional banking systems in fiat, the “on-chain” and “off-chain” operations will need repeated switching, reducing efficiency. With compliant stablecoins, RWA projects can directly distribute returns to investors’ addresses in stablecoin form, enabling automatic and transparent payout.

Third is connectivity. Stablecoins can serve as a bridge between RWA and the broader digital asset ecosystem. After selling RWA tokens, investors can hold stablecoins, ready for reinvestment, transfer to other compliant DeFi protocols for yield, or exchange back to fiat via licensed exchanges. This seamless integration greatly improves capital efficiency.

Paul Chan emphasized that the government and financial regulators will continue to promote licensed issuers to explore more application scenarios under compliant and risk-controlled conditions. This indicates stablecoins will not only be used for simple payments but may extend into more complex financial scenarios.

For example, the recent strategic partnership between EX.IO and OpenEden demonstrates this potential. OpenEden, a Bermuda-regulated RWA tokenization platform, issues products including tokenized US Treasuries (TBILL, custodized by BNY Mellon) and regulated yield-stablecoins like USDO. Their collaboration aims to introduce more diverse, high-quality tokenized assets in Hong Kong. The combination of “compliant stablecoin + compliant RWA” forms a complete compliant on-chain financial ecosystem.

Of course, the development of compliant stablecoins faces practical challenges. Currently, the global stablecoin market is dominated by USDT and USDC. How can Hong Kong’s licensed stablecoins break through this landscape? Will HKD stablecoins be limited by the international status of the Hong Kong dollar? The answers depend on whether licensed issuers can develop attractive applications and whether regulators can appropriately open cross-border use cases under risk control.

Hong Kong, as an international financial hub, has aligned its stablecoin regulation with international standards from the start. The budget states that in the next two years, Hong Kong will implement the OECD’s crypto asset reporting framework and revised common reporting standards, enhancing international tax transparency and combating cross-border tax evasion. This means Hong Kong’s compliant stablecoins are not only serving the local market but also have the potential to align with global standards.

Third move: activate liquidity to turn RWA from “holding and not selling” into “sell at any time”

A long-standing criticism of RWA is its lack of liquidity. Unlike stocks and bonds that can be bought and sold on secondary markets at any time, many RWA products are inherently “hold-oriented”—real estate requires long-term holding for rental income and appreciation; private equity shares often have lock-up periods; even tokenized government bonds, if lacking active trading markets, are merely “buy and hold” tools.

However, the true value of assets lies not only in the income they generate but also in their ability to be liquidated at reasonable prices when needed. Without solving liquidity issues, RWA will remain niche alternative investments, unable to become a mainstream asset allocation.

Paul Chan’s budget states that the SFC will further promote market liquidity for digital assets in Hong Kong, providing more products and services for professional investors, and will establish an accelerator to speed up market innovation.

This sends two key signals.

The first is on the product side. The SFC’s “providing more products and services for professional investors” suggests future offerings may include more regulated RWA funds, structured products, and tokenized investment portfolios aimed at professional clients. Compared to fragmented retail trading, institutional-led product issuance has scale advantages and is more conducive to forming deep secondary markets.

Dering Holdings’ case already demonstrates this potential. The company plans to tokenize not only a single property but also fund interests in Animoca Brands LPF. Tokenizing fund shares allows investors to indirectly hold a diversified portfolio rather than betting on a single asset. This structure is inherently easier to develop a trading market for than single-asset tokens.

The second is on the ecosystem side. The SFC’s “establishing an accelerator to promote market innovation” indicates Hong Kong’s intention to foster an innovation ecosystem around digital assets. RWA, as the core track connecting physical assets with digital finance, is likely to be a key focus of this support.

An accelerator’s role is not just funding but resource integration. A startup supported by an accelerator can more easily connect with licensed exchanges, compliant custodians, stablecoin issuers, and other ecosystem players, quickly building a complete business loop. This ecosystem effect is far more explosive than individual innovation.

The budget also mentions a seemingly minor detail: to support tokenization of bonds, the government will provide guidance on using distributed ledgers for bondholder registries, explore electronic signing of issuance documents, and promote electronic registration of bearer bonds. While technical, these steps are crucial for the legal foundation of RWA liquidity. If bond registries can be stored on distributed ledgers, the legal status of tokenized bonds becomes clear, with legal transfer, pledge, and settlement procedures in place. Legal certainty is a prerequisite for active secondary markets.

Chen Yong, a member of the National People’s Congress and a Hong Kong Legislative Council member, pointed out three observations on Hong Kong’s RWA development: Hong Kong’s compliance-first approach builds a solid regulatory foundation; the stablecoin regulation and sandbox practice create a “strict but flexible” regulatory framework; and the city’s role as an internal and external hub facilitates resource flow, connecting high-quality mainland assets with global capital. These align with Paul Chan’s three core pillars—licensing to solve compliance, stablecoins to facilitate settlement, and liquidity and accelerators to activate the ecosystem. All are interconnected and indispensable.

Of course, a clear roadmap does not mean an easy path.

Details of the draft are yet to be announced. How cross-border capital flows will be managed, how legal conflicts across jurisdictions will be coordinated, and how “professional investors” and future retail access will be balanced are variables to watch. The actual operation of licensed stablecoin issuers, market acceptance of RWA products, and secondary market depth and stability will all require time to validate.

But the direction is clear. Hong Kong is not trying to contain all possibilities within a single regulatory framework but is building a complete “compliant custody-stablecoin settlement-liquidity product” infrastructure loop to foster RWA’s autonomous growth. As trust, settlement, and circulation issues are gradually addressed through policy, RWA will evolve from marginal innovation experiments into a standard path for traditional finance to embrace the digital world.

For industry practitioners, the most pressing question now is: when the compliant infrastructure is in place, and licensed custodians, compliant stablecoins, and regulated trading platforms are all ready, are our products and services prepared to enter this “highway”?

Dering Holdings has already received its no-objection letter. More projects are lining up. Hong Kong’s “super connector” is accelerating, and the story of RWA is just beginning a new chapter.

References:

• “Hong Kong Annual Fiscal Budget: First Stablecoin Licenses to be Issued Next Month, Digital Asset Platform to be Established Within the Year”
• “Paul Chan: Hong Kong Has Implemented a Licensing Regime for Fiat Stablecoin Issuers, First Licenses to be Issued in March”
• “Dering Holdings (01709.HK)’s RWA Tokenization Plan Receives No-Objection from HK SFC, Will Advance Tokenization of Dering Tower and Animoca Brands LPF”