Stablecoin Hype Continues Amid Questions Over Profitability

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The stablecoin narrative remains one of the most compelling stories in the digital asset space. Despite growing regulatory clarity and increasing institutional interest, a critical question lingers: Can stablecoin issuers build sustainable, long-term profitability?

Recent developments in Hong Kong have reignited investor enthusiasm, with multiple companies signaling their intent to enter the regulated stablecoin market. Yet, beneath the surface excitement lies uncertainty about business models, revenue streams, and long-term viability.

👉 Discover how stablecoins are reshaping global finance and what it means for future digital transactions.

Market Surge Sparks Investor Interest

On July 2, executives from Dmall Digital Intelligence (02586.HK) revealed plans to apply for a stablecoin license in Hong Kong. The announcement sent shockwaves through the market: shares surged nearly 90% intraday on July 3 before closing up over 23%. This rally wasn’t isolated—other “stablecoin概念股” (concept stocks) also gained momentum, including Victory Securities (up 14.51%) and Guotai Junan International (up 11.56%).

Dmall, founded in 2015, is China’s leading provider of digital retail solutions by revenue and GMV (gross merchandise value), according to Frost & Sullivan. While its core business revolves around optimizing brick-and-mortar retail operations through technology, the company has been strategically expanding into Web3.

Tommy Tang, Vice President and CFO of Dmall, emphasized that the firm sees cryptocurrency as a long-term strategic pillar. The company has already allocated capital toward Bitcoin investments and is actively recruiting Web3 talent. According to Tang, stablecoins can significantly enhance cross-border payment efficiency for retail clients, reduce transaction costs, and improve customer experience—all aligned with the broader trend of crypto adoption in global commerce.

This vision is backed by action. Dmall previously entered a strategic partnership with HashKey Group, one of Hong Kong’s licensed virtual asset exchanges. Under the agreement, Dmall will open a trading account on HashKey Exchange and collaborate on digital asset services, blockchain innovation, and ecosystem development—laying foundational infrastructure for potential stablecoin integration.

Regulatory Momentum Builds in Hong Kong

Hong Kong’s Financial Services and Treasury Bureau announced that the Stablecoin Issuance Ordinance will take effect on August 1, 2025, at which point the Hong Kong Monetary Authority (HKMA) will begin accepting license applications.

Though formal applications haven't opened yet, competition is heating up. Major players like Ant International and LianLian Digital (a Hong Kong-listed fintech firm) have both indicated they are preparing submissions. Ant International plans to use its potential stablecoin for cross-border payments and global treasury management, while LianLian is evaluating applications in both Hong Kong and Singapore.

To date, the HKMA has selected three groups for its Stablecoin Issuer Sandbox Program from over 40 applicants:

These sandbox participants have been testing issuance frameworks and use cases under controlled conditions. Industry insiders suggest they hold an advantage in the upcoming licensing race due to their early engagement with regulators.

However, HKMA Chief Executive Eddie Yue was clear: sandbox participation does not guarantee approval. All applicants will be evaluated against strict criteria—including reserve management practices, compliance infrastructure, technical security, and real-world use case viability. Initially, only a limited number of licenses will be granted.

The Profitability Puzzle: Can Stablecoins Generate Real Returns?

While market sentiment is bullish, fundamental concerns remain about how stablecoin issuers actually make money.

Take Circle, often referred to as the "first stablecoin stock" following its public listing. Its token USDC is pegged 1:1 to the U.S. dollar and backed by short-term U.S. Treasuries and cash equivalents. In 2024, Circle reported $1.676 billion in total revenue—of which $1.661 billion came from reserve income.

👉 Explore how reserve-backed assets power stablecoin economics and influence investor returns.

This model appears simple: collect user deposits in USD, issue equivalent stablecoins, invest reserves in low-risk instruments like T-bills, and earn interest.

But this simplicity brings vulnerability.

According to Haitong International analyst Liu Xi, “Circle’s revenue is almost entirely dependent on interest rate spreads. When rates fall, so does profitability.” Morgan Stanley echoed this concern in a recent report, warning of a “profit squeeze” driven by declining yields and rising distribution costs—especially as exchanges demand higher rebates to list or promote stablecoins.

Moreover, the market structure poses risks:

If the current “winner-takes-most” dynamic shifts, Circle—and any future issuer relying solely on reserve income—could see margins erode rapidly.

Frequently Asked Questions (FAQ)

Q: What is a stablecoin?
A: A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset like the U.S. dollar, gold, or other financial instruments.

Q: Why are companies applying for stablecoin licenses in Hong Kong?
A: Hong Kong offers a clear regulatory framework and strategic access to both mainland China and global markets, making it an attractive hub for fintech innovation and cross-border financial services.

Q: How do stablecoin issuers earn money?
A: Most generate revenue by investing the fiat reserves backing their tokens—typically in short-term government securities—and capturing the yield differential.

Q: Is investing in stablecoin-related stocks risky?
A: Yes. While regulatory progress boosts investor confidence, these businesses face interest rate risk, competitive pressures, and evolving compliance demands that can impact profitability.

Q: Are all stablecoins backed 1:1 by cash?
A: Not necessarily. While reputable issuers like Circle maintain full reserves of cash and high-quality liquid assets, some stablecoins use algorithmic mechanisms or mixed collateral pools, which carry higher risk.

Q: Could stablecoins replace traditional payment systems?
A: They have strong potential in cross-border remittances and decentralized finance (DeFi), but widespread adoption depends on regulation, scalability, and public trust.

Looking Ahead: Beyond Reserve Yields

For stablecoin issuers to thrive beyond speculative hype, they must evolve their business models. Simply earning interest on reserves is not enough in a low-rate environment or during periods of high competition.

Future success may depend on:

Dmall’s strategy—tying stablecoins to real-world retail efficiency—could be a blueprint. By reducing friction in international payments for merchants and consumers alike, it moves beyond passive yield generation toward active value creation.

👉 Learn how next-generation stablecoins are powering the future of programmable commerce.

Core Keywords

As regulatory frameworks solidify and more firms enter the space, the next phase of stablecoin development will focus not just on compliance—but on building resilient, diversified revenue models that deliver real utility. The winners won’t just issue coins; they’ll redefine how value moves in the digital economy.