Digital payments

The revenue case for digital money is still emerging – but with global rules now in force and Hong Kong’s market infrastructure moving from sandbox to live, real-value settlement, the long-term structural implications for banks are too significant to ignore

Globally, banks, regulators and corporates are moving beyond experimentation in stablecoins, tokenised deposits, central bank digital currencies (CBDCs), real-world asset (RWA) tokenisation and blockchain-based settlement. What has changed and accelerated this activity over the past year is the foundation beneath it all. The United States enacted its first federal stablecoin law, the GENIUS Act^1, in July 2025; the European Union’s Markets in Crypto-Assets Regulation (MiCA)² is now fully in force; and the Basel Committee’s prudential standard for banks’ crypto asset exposures (SCO60)³, together with its disclosure framework, took effect on 1 January 2026. For the first time, banks have a clear – and capital-aware – basis on which to build.

Hong Kong has moved faster and further than most. Within roughly a year it has set out a whole-of-government strategy in Policy Statement 2.0⁴, brought a statutory stablecoin regime into force, granted its first stablecoin licenses, and – critically – taken live market infrastructure from sandbox to real-value settlement. For banks, the question is how to participate on terms that are commercially and prudentially sound.

It’s important to be candid about scale. Most digital-asset initiatives remain small relative to traditional banking, payments and capital markets activity. For many banks, the immediate priority should not be to generate significant new revenue, but to build capability, understand the risks, and avoid being left behind as market infrastructure rewires around them. We expect adoption to follow a J-curve, with a steeper acceleration likely between 2030 to 2035 as standards, interoperability and capital treatment mature.

Simon Shum

Head of Digital Assets, Hong Kong SAR,

KPMG China

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Antony Ruddenklau

Global Head of Fintech and Innovation

KPMG in Singapore

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A common language: what we mean by tokenisation

Tokenisation is the process of digitising a representation of an underlying asset on a distributed-ledger technology (DLT) protocol. KPMG’s taxonomy groups tokenised assets into four families. For banks, the two that matter most today are digital money and tokenised financial assets – because that is where regulated infrastructure, real volume and a defensible business case are emerging first.

Three forms of digital money co-exist

A key question for banks is which form of digital money will become dominant. On current evidence, none will win outright: stablecoins, tokenised deposits and CBDCs are likely to coexist, each serving different use cases.

Stablecoins have attracted the most attention, given their role in crypto markets and cross-border digital asset activity, and are now moving into more practical use cases - remittances, treasury operations, merchant payments and business-to-business settlement.

The market is material: total stablecoin supply was close to USD 280 billion by May 2026⁵, overwhelmingly USD-pegged, and stablecoin transfer volume reached a record of roughly USD 4.5 trillion in the first quarter of 2026⁶. But banks should read these figures carefully. Most activity remains within the digital-asset ecosystem rather than the real economy, and is dominated by on-chain transfers between holders rather than payments for goods and services⁷.

Stablecoin stability will ultimately depend on the quality, liquidity and transparency of the underlying reserves. In periods of stress, questions can arise around de-pegging, redemption, liquidity fragmentation and whether reserves are genuinely available on a one-to-one basis. The new statutory regimes – Hong Kong’s Stablecoins Ordinance, GENIUS in the US, and MiCA in the EU – are designed precisely to address these issues through reserve, redemption, governance and disclosure standards.

The practical implication for banks in Hong Kong is that licensing and ongoing compliance will rest on independent assurance over reserve adequacy, redemption and controls. To address this, the Hong Kong Institute of Certified Public Accountants (HKICPA) issued its practice Note 831 in May 2026⁸ to provide guidance to auditors on their reporting responsibilities in relation to the independent attestation of reserve assets of licensed stablecoin issuers.

Trust in regulated stablecoins will depend not only on Hong Kong’s new statutory rules, but also on credible, independent assurance over reserves, redemption arrangements and related controls.

The need to safeguard stablecoin reserves is also why regulators – and banks – have placed equal weight and attention on tokenised deposits – commercial bank deposits represented on a distributed ledger. They deliver the benefits of tokenisation (programmability, faster settlement and operational efficiency) while keeping money on regulated bank balance sheets. For banks, this is the most natural area of development, particularly for wholesale use cases: interbank settlement, supply-chain and trade finance, corporate treasury and institutional payments - areas where banks already sit at the centre.

Hong Kong and the world: from policy to live market infrastructure and focus on the real- economy

One of Hong Kong’s advantages is that it has assembled the full regulatory and infrastructure stack – from the strategic framework set out in the government’s Policy Statement 2.0, through the statutory regime established under the Stablecoins Ordinance to the infrastructure enabled by Project EnsembleTX. Critically, Hong Kong is now moving beyond pilots with real value settlements.

The broad focus is, and will continue to be the real economy: faster cross-border payments, lower settlement frictions and new financing for corporates and SMEs through working-capital, trade and supply-chain finance applications, and atomic settlement that frees up capital otherwise trapped in transaction chains.

For banks with regional footprints, Hong Kong’s progress also needs to be viewed in a wider Asia-Pacific context. There is currently no harmonised framework for stablecoins or tokenised deposits across Singapore, Japan,

the Chinese Mainland and the major Southeast Asian markets. Regulatory frameworks across the region are developing at different speeds, and that is influencing how products are structured, booked, distributed and governed.

For regional banks and capital markets firms with multi-jurisdiction footprints, navigating this divergence – and managing the risk of regulatory arbitrage and fragmentation – is a key operational challenge.

The business case for many banks is still emerging

Despite large investments by the bigger banks in Hong Kong, many local and regional banks remain cautious and in wait-and-see mode. That is understandable. Building digital asset capabilities requires investment in technology, talent, governance, legal structuring, risk management, compliance and cybersecurity. In the short term, these investments can look like cost rather than immediate value.

This is a genuine dilemma. Waiting too long risks ceding ground to competitors, fintechs or new market infrastructure providers; moving too fast without a clear business case could risk stranded investment. For banks currently in “wait-and-see” mode, the right posture is to build “muscle memory”– developing the teams, governance, technology knowledge and regulatory familiarity that will be needed to act decisively when adoption accelerates.

Risk management must evolve with the market

As they build “muscle memory”, banks will also need to adapt their risk management frameworks across several dimensions.

Custody risk

For institutional and private banking clients, the custody of digital assets remains one of the less settled areas of the market. Questions of liability where assets are lost or compromised, the structure of sub-custody arrangements, the availability and scope of insurance, and the control and recovery of private keys under insolvency are not yet resolved on a consistent basis. Cross-border arrangements add a further dimension, since a client’s rights over a tokenised asset may vary by jurisdiction.
Technology and cyber risk

DLT, smart contracts and digital custody introduce new operational and security considerations – wallet infrastructure, private key management, smart contract vulnerabilities, blockchain analytics, transaction monitoring and incident response.
Legal and documentation risk

Smart contracts are frequently considered a technology matter, but they also raise unresolved legal questions. As they begin to support securities, derivatives, repo and collateral workflows, banks will need greater certainty on enforceability, settlement finality and responsibility when code, data or infrastructure fails. These issues will be critical to market confidence.
Compliance and financial-crime risk

Digital asset activity creates challenges in AML, sanctions screening, fraud monitoring and market conduct. Banks must understand the source of funds, counterparties and transaction patterns across both traditional and on-chain environments – and align with new tax-transparency rules such as OECD’s Crypto-Asset Reporting Framework (CARF).
Governance risk

Many banks are beginning their initiatives from the bottom-up through innovation or product teams. As activity grows, banks will need clearer accountability, stronger controls and more consistent decision-making frameworks across the organisation before exposures become material.

¹ S.1582 - GENIUS Act

² Markets in Crypto-Assets Regulation (MiCA)

³ Press release: Basel Committee publishes final disclosure framework for banks’ cryptoasset exposures and targeted amendments to its cryptoasset standard

⁴ Second policy statement on development of digital assets issued to scale Hong Kong to new heights of global digital asset leadership

⁵ Visa Onchain Analytics Dashboard

⁶ Stablecoin Volume Hits Record $4.5T As Asia Drives Q1 Boom

⁷ Stablecoin payments: the truth behind the numbers white-paper-stablecoin-payments-truth-behind-numbers.pdf

⁸ Update No.344

⁹ Regulatory Regime for Stablecoin Issuers

¹⁰ HKMA completes e-HKD Pilot Programme and outlines future direction of e-HKD

¹¹ Hong Kong Monetary Authority - HKSAR Government’s Third Digital Green Bonds Offering HKMA announces the new phase of Project Ensemble to support real-value transactions in tokenised deposits and digital assets

¹² The 2026-27 Budget Speech

¹³ Eddid Financial Backs Hong Kong’s First Regulated Silver RWA Offering

¹⁴ https://www.prnewswire.com/apac/news-releases/eddid-financial-backs-hong-kongs-first-regulated-silver-rwaoffering-302723074.html

¹⁵ Hong Kong Monetary Authority - Eddie Yue on Robust development of the regulated stablecoin ecosystem in Hong Kong

¹⁶ Hong Kong Monetary Authority - HKMA announces the new phase of Project Ensemble to support real-value transactions in tokenised deposits and digital assets