Gold, stablecoins and Hong Kongs market reality

US Treasury Secretary Scott Bessent’s recent remarks before the Senate Banking Committee have quickly entered the global financial conversation.

Asked whether China might be developing digital assets backed by gold rather than the renminbi, Bessent said he “would not be surprised,” citing Hong Kong’s large regulatory sandbox and the Hong Kong Monetary Authority’s active global engagement.

The comment immediately fueled speculation that China may be exploring a gold-backed digital system designed to challenge US dollar dominance. The real story, however, is not about gold but about how Hong Kong is quietly redefining the infrastructure of digital liquidity.

From a market-structure perspective, however, such interpretations reflect geopolitical anxiety more than observable financial reality. The question is not whether gold-backed digital assets are theoretically possible — they are — but whether current regulatory and market structures support such a narrative.

Hong Kong’s role in financial innovation is frequently misunderstood outside Asia. The city’s regulatory sandbox is fundamentally a framework for controlled experimentation within established financial principles, not a platform for monetary confrontation.

Recent public comments by Hong Kong’s Financial Secretary Paul Chan Mo-po further illustrate this cautious regulatory trajectory. Around January 10, 2026, during a public consultation forum on the Hong Kong budget process, Chan responded to participants’ suggestions to link future stablecoins to gold.

He indicated that authorities would first focus on completing the initial phase of fiat-referenced stablecoin development and, only thereafter, cautiously consider linking stablecoins to gold or other assets, emphasizing that any such move would require careful study and gradual evaluation.

Local media widely reported this as a willingness to prudently consider gold-linked stablecoin proposals — a signal of openness to research, not a policy commitment.

According to Cyril Kwan, investment manager at Archduke United LPF, the architecture of stablecoin regulation already places clear boundaries on what is realistically possible.

Under the current framework, reserve assets must consist primarily of high-quality, highly liquid instruments, with core allocations centered on bank instruments or government bonds to ensure redemption stability and liquidity.

Gold, if included at all, would likely represent only a small allocation within a diversified reserve structure rather than serve as the anchor of a new monetary system. This design points to a simple conclusion: Hong Kong’s stablecoin agenda is about financial stability and operational efficiency, not constructing an alternative currency order.

Days later, during the World Economic Forum in Davos around January 20, 2026, Chan reiterated Hong Kong’s stablecoin ambitions but focused primarily on the expected issuance of the first batch of licenses later in 2026, centered on fiat-referenced stablecoins.

While Chan did not restate the gold discussion directly, the broader message remained consistent: innovation would proceed, but within a deliberately cautious regulatory framework.

The real structural shift, therefore, lies not in monetary replacement but in liquidity infrastructure. Kwan notes that to maintain stability and regulatory consistency, asset backing for stablecoins in Hong Kong is expected to be primarily denominated in Hong Kong dollars (HKD).

In the initial stage, HKD stablecoins are likely to be offered through licensed Virtual Asset Trading Platforms (VATPs), where they can be traded alongside other digital assets. This arrangement allows investors to enter the ecosystem using offshore renminbi (CNH), creating a functional bridge between virtual assets and fiat currencies — particularly between Hong Kong dollar and offshore renminbi — rather than replacing either.

This cautious design is embedded in law. Hong Kong’s Stablecoins Ordinance, which came into effect on August 1, 2025, and is overseen by the Hong Kong Monetary Authority (HKMA), applies only to fiat-referenced stablecoins, such as those pegged to the Hong Kong dollar or the US dollar.

The framework requires 100% high-quality reserve assets, strict segregation of client funds and robust anti-money laundering and counterterrorism controls. Commodity-backed structures, including gold-backed stablecoins, are currently excluded due to concerns over price volatility and regulatory complexity. Discussions around gold-linked stablecoins, therefore, remain exploratory rather than executable policy.

This distinction also clarifies why China’s digital yuan is largely irrelevant to the current debate. Mainland regulatory constraints make a direct linkage between the digital yuan or eCNY, and stablecoin structures unlikely in the foreseeable future. Hong Kong’s experimentation operates within an international market framework rather than as an extension of mainland monetary policy.

If gold enters the digital asset landscape, the more realistic scenario is through tokenized real-world assets rather than a gold-backed currency. Kwan argues that only a limited number of market participants are likely to issue gold-backed real-world asset (RWA) structures.

In such cases, HKD stablecoins could serve as settlement instruments for gold transactions, improving trading efficiency, particularly during periods of heightened price volatility. This would strengthen Hong Kong’s position as an international gold trading hub — not by replacing existing monetary systems, but by modernizing settlement infrastructure.

Seen from this angle, Bessent’s remarks reveal less about what China is building and more about how policymakers interpret financial experimentation beyond US borders. The emerging reality in Hong Kong is not a gold-based challenge to the dollar but a regulated convergence of stablecoins, digital asset markets and tokenized real-world assets operating within existing financial rules.

The deeper risk lies in confusing infrastructure evolution with monetary rivalry. Financial systems rarely change through abrupt replacement; they evolve through incremental improvements in how capital moves across jurisdictions and asset classes.

Hong Kong’s role today is not to overturn the global monetary order, but to test how digital infrastructure can coexist with it. Ironically, that may be precisely why its experiments matter — not because they challenge the system, but because they may quietly define how the next version of the system works.

Jeffrey Sze is ambassador for arts, culture and tourism of Reichenau and chairman of Habsburg Asia. He serves as general partner of Archduke United LPF and Asia Empower LPF, focusing on cross-border institutional investment at the intersection of art, finance and regulated digital innovation, including AI and digital assets. In 2017, he was involved in securing one of Switzerland’s early cryptocurrency exchange licenses.