SS #21 - China Cracks Down Hong Kong Pushes Stablecoins

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Good Morning.

Welcome to our 21st edition of the StableScope. A new 2x a week, stablecoin-focused newsletter from Launchy. Given the growth of the vertical, there's an increasing demand for more recurring reporting and curation on stablecoins.

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In Today's Edition:

• Headline: China Cracks Down Hong Kong Pushes Stablecoins

• Quick Bites: S&P Global gives Sky Protocol 'B-' credit rating

• Yield of the Week: 33.47% APR in USDC on Flash

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HEADLINE

China Cracks Down Hong Kong Pushes Stablecoins

State of play: Chinese regulators have ordered domestic brokerages and research firms to stop promoting stablecoins, halting research publications and cancelling seminars over fears of speculation and fraud.

• Regulators in mainland China are curbing stablecoin promotion amid concerns over illicit fundraising and retail speculation.

• While Beijing clamps down, Hong Kong is developing its own stablecoin-issuer framework to position itself as a digital asset hub.

• The U.S. recently passed its first federal stablecoin law, signaling regulatory endorsement rather than prohibition.

What’s Next: China will likely intensify enforcement on onshore stablecoin-related activities, possibly targeting OTC channels and cross-border usage. Hong Kong may attract more stablecoin business from regional players seeking regulatory clarity.

Why it Matters: The move underscores a stark policy divide: China aims for control, while the U.S. embraces regulation. This split could reshape digital payment competition, redirect capital flows in Asia, and intensify the geopolitical race in cross-border finance especially with China’s e-CNY push.

Our Take: Mainland China is closing the door on private stablecoins, but Hong Kong offers a potential testing ground for regulated adoption. Market participants should track e-CNY’s cross-border expansion and arbitrage opportunities between jurisdictions.

QUICK BITES

• Ripple acquires Rail for $200M.

• S&P Global gives Sky Protocol 'B-' credit rating.

• Tether adds regulated EU beachhead with Bit2Me stake.

• ProShares launches 2x leveraged ETF tracking Circle stock.

• Paxos settles with New York financial regulator for $48.5M.

• World Liberty Financial seeking $1.5B for WLFI treasury company.

• Anchorpoint Financial initiates stablecoin licensing process in Hong Kong.

YIELD OF THE WEEK

Asymmetry Finance sUSDaf: 12.75% APR

• Asymmetry Finance in partnership with Yearn Finance launches sUSDaf, a yield-bearing token that automates the process of earning on USDaf. It simplifies the complex task of manually rebalancing across multiple Stability Pools by using Yearn's vault infrastructure to compound and optimize returns hourly.

• sUSDaf provides users with a one-click solution to access the highest available yield from USDaf. The yield is generated from 75% of fees paid by users who borrow USDaf, which are then distributed to the Stability Pools.

• The token integrates with CoW Swap's solvers to facilitate permissionless Dutch Auctions. An off-chain bot streamlines this process by monitoring prices and submitting orders, ensuring auctions are filled seamlessly in a competitive and decentralized manner.

Drift Hyper JLP Vault: 62.76% APY in USDC

• Drift’s Hyper JLP is an enhanced version of a JLP vault that aims to deliver superior returns without adding market risk. It achieves this by replacing traditional crypto assets like WETH and WBTC with high-performing, yield-bearing alternatives, effectively turning idle stablecoins into delta-neutral yield engines.

• The vault has a fee structure that includes a 15% performance fee on profits and a 2% annual management fee. Deposits are subject to a one-day soft lock, after which funds become available for withdrawal. Any profits earned during this redemption period are not distributed.

• The vault is designed to maximize returns and upgrading its underlying assets. This allows it to generate superior upside while maintaining a delta-neutral position, ensuring that the vault's performance is not tied to market volatility.

Flash sFLP.1: 33.47% APR in USDC

• Flash.trade launches sFLP.1, a liquidity pool, also known as the Crypto Pool, which serves as a counterparty for all trades on ETH, BTC, and SOL markets. It consists of a mix of these assets along with USDC.

• The value of sFLPx, which represents a share in the pool, is dynamic. Its value fluctuates based on the price movements of the underlying tokens, the profits and losses of traders, and the fees generated from trading activities.

• sFLP.1 and FLP.1 are two representations of the same underlying liquidity pool. The key distinction is that sFLP.1 requires manual collection of the fees, while FLP.1 automatically compounds them for the user.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.