The world of stablecoins is witnessing significant developments, with both regulatory advancements and market movements capturing global attention. In a landmark move, the Hong Kong Special Administrative Region government has set a definitive date for the implementation of its dedicated stablecoin legislation.
Circle’s Spectacular Market Entry
On June 5, Circle, a leading stablecoin issuer, made its debut on the New York Stock Exchange, marking a milestone as the first company primarily focused on stablecoins to go public. The initial public offering was met with exceptional investor enthusiasm.
Circle’s IPO was initially planned with 24 million shares in a price range of $24 to $26 per share. Due to overwhelming demand, with the offering being oversubscribed by more than 20 times, the final number of shares issued was increased to 34 million, priced at $31 per share. This successful offering raised a total of $1.054 billion.
Trading began with a powerful start. The stock opened at $69 per share, a gain of over 122% from the IPO price. The momentum continued throughout the day, with the share price soaring as high as $103.75 at its peak—an increase of 235%—which triggered multiple trading halts due to volatility. Closing its first day at $83.23 per share, Circle finished with a remarkable 168% gain, achieving a market capitalization exceeding $18 billion.
The fervor continued into the next day's pre-market trading, where the stock price surged another 20%, bringing the total gain from the IPO price to over 220%.
Understanding Circle and Its Core Business
Founded in 2013, Circle is a financial technology company whose primary products are the USDC (USD Coin) and EURC (Euro Coin) stablecoins. USDC is pegged 1:1 to the U.S. dollar and is widely used globally for payments, settlements, and as a digital store of value.
As of the end of May 2025, the circulating supply of USDC reached $61 billion, granting it a 24.4% market share and making it the world's second-largest stablecoin, trailing only Tether's USDT. A key differentiator for USDC is its strong emphasis on regulatory compliance and transparency.
Unlike some competitors, USDC's reserves are held entirely in cash and short-term U.S. Treasuries. This structure, coupled with licenses from U.S. and European regulators like FinCEN and EMI, aligns with new regulatory requirements for "high-quality liquid assets."
Circle's revenue has seen substantial growth, rising from $772 million in 2022 to $1.676 billion in 2024. The company also turned profitable, reporting net income of $268 million in 2023 and $156 million in 2024. Its primary revenue source is the interest earned on the assets backing USDC. In 2024, this interest income accounted for 99% of its total revenue.
With the U.S. Federal Reserve’s high-interest-rate environment, the yield on these reserves has been significant. In Q1 2025 alone, Circle earned approximately $210 million in interest income.
However, this revenue model also presents a risk. The company's financial performance is highly sensitive to U.S. monetary policy. Potential future interest rate cuts by the Fed could exert significant downward pressure on Circle's core income stream.
Hong Kong’s Landmark Stablecoin Regulation
In a parallel significant development, the Hong Kong government gazetted the Stablecoin Ordinance (Commencement) Notice on June 6, officially designating August 1, 2025, as the date the Stablecoin Ordinance comes into effect.
This follows the ordinance’s publication in the gazette on May 30, when it formally became law. The primary objective of this legislation is to regulate activities related to stablecoins and establish a licensing regime for these activities within Hong Kong.
Once the ordinance takes effect, any entity issuing fiat-referenced stablecoins in the course of business in Hong Kong, or issuing stablecoins purportedly referencing the value of the Hong Kong dollar from outside the region, must obtain a license from the Monetary Authority.
Mr. Christopher Hui, Secretary for Financial Services and the Treasury, stated, “The commencement of the Ordinance and the licensing regime will provide appropriate regulation for relevant stablecoin activities. This is a milestone in fostering the sustainable development of Hong Kong’s stablecoin and digital asset ecosystem.”
Mr. Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, previously commented, “The Ordinance establishes a risk-based, pragmatic, and flexible regulatory regime. We believe a sound and appropriate regulatory environment will create conducive conditions to support the healthy, responsible, and sustainable development of Hong Kong’s stablecoin and digital asset ecosystem.”
This move is seen as a strategic effort to bolster Hong Kong’s competitiveness as an international financial hub. Analysts at CITIC Securities noted that this ordinance, being the world’s first dedicated stablecoin legislation centered on the principle of "value reference supervision," could reshape the financial landscape, support the internationalization of the Chinese yuan, and activate the broader Web3 and digital asset ecosystem.
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The Broader Impact and Future of Stablecoins
A stablecoin is a type of digital currency designed to maintain a stable value by being pegged to a reserve asset like a fiat currency (e.g., the U.S. dollar) or commodities. This stability makes them particularly useful for crypto trading and cross-border fund transfers, as they reduce the volatility associated with cryptocurrencies like Bitcoin.
The regulatory landscape for stablecoins is evolving rapidly worldwide. The U.S. Senate passed its own stablecoin bill in May, and market expectations suggest that the legislative process for dollar-based crypto stablecoins could be completed as early as August. This would signal the formation of a U.S. government-backed digital dollar ecosystem.
Some analysts believe the U.S. government sees stablecoins as a tool to bolster demand for U.S. Treasury bonds and strengthen the dollar's global position. However, this new demand source could also introduce new volatility into the short-term government debt market.
The general consensus among financial institutions is that the push for cryptocurrency and stablecoin legislation in the U.S., particularly under the current administration, serves multiple purposes: fulfilling campaign promises, expanding the stablecoin market to alleviate pressure on Treasury demand, and reinforcing the tie between stablecoins and the U.S. dollar to slow de-dollarization trends.
The continued formalization of the stablecoin market is viewed as a medium to long-term positive for the broader cryptocurrency sector, though its pace may depend on future policy clarity.
Frequently Asked Questions
What is a stablecoin?
A stablecoin is a digital currency whose value is pegged to a stable external asset, most often a fiat currency like the U.S. dollar. This peg is designed to minimize the price volatility common in other cryptocurrencies, making stablecoins more suitable for everyday transactions and as a reliable store of value within the digital economy.
Why is Hong Kong’s Stablecoin Ordinance important?
Hong Kong’s ordinance is groundbreaking as it is the world’s first comprehensive legal framework specifically for stablecoins. It establishes a clear licensing system for issuers, aiming to protect consumers, ensure financial stability, and position Hong Kong as a leading, well-regulated hub for digital asset innovation and sustainable development.
How does Circle generate its revenue?
Circle’s primary revenue source is the interest income generated from the reserve assets that back its USDC stablecoin. These reserves are held in cash and short-term U.S. government securities. In a high-interest-rate environment, this generates significant earnings, which constituted 99% of its total revenue in 2024.
What are the risks for a company like Circle?
The main risk for Circle is its heavy reliance on interest income from its reserves. This makes its business model highly dependent on U.S. monetary policy. If the Federal Reserve lowers interest rates, the yield on these assets would decrease, potentially impacting Circle’s profitability significantly.
What is the difference between USDT and USDC?
The main difference lies in transparency and compliance. While both are pegged to the U.S. dollar, Tether’s USDT has historically held reserves that included commercial paper and other instruments. Circle’s USDC reserves are fully backed by cash and short-term U.S. Treasuries, and the company operates with multiple regulatory licenses, making it a more compliant option for many institutional users.
How could stablecoin regulation affect global finance?
Comprehensive stablecoin regulation could legitimize digital currencies for widespread use in cross-border payments and settlements. It may also increase demand for government debt if reserves are required to be held in such assets. Ultimately, well-regulated stablecoins could lead to greater efficiency in the global financial system and foster the growth of the digital asset ecosystem.