Financial experts are predicting a surge in cryptocurrency activity in Asia, driven by the forthcoming stablecoin regulations in Hong Kong, set to be implemented this Friday. Stablecoins, digital assets pegged to traditional currencies like the U.S. dollar, are the focus of this new legislation. Hong Kong’s initiative establishes a regulated framework for firms involved in issuing and handling these digital currencies, mirroring similar efforts like the U.S. GENIUS Act. Initially, Morgan Stanley anticipates that stablecoins will primarily be utilized for cryptocurrency trading, potentially attracting greater investment from institutional players. They suggest that Futu Holdings is particularly well-positioned to benefit, assigning an “overweight” rating with a target price of $164.25. Meanwhile, Citi analysts favor Up Fintech (also known as Tiger Brokers), upgrading its rating from “neutral” to “buy” in a report released on July 21st. They maintain a “neutral” stance on Futu, noting the stock’s recent price increases. Both Futu and Up Fintech, listed in the U.S. back in 2019 prior to Robinhood’s IPO, provide online brokerage services for trading stocks and digital currencies. Although they originated in mainland China, they have shifted their focus toward Hong Kong and Singapore due to regulatory restrictions and crypto prohibitions imposed by Beijing. Analysts at Citi estimate the combined cryptocurrency trading market in Hong Kong and Singapore at $640 billion, even after accounting for competition from unauthorized cryptocurrency exchanges. This substantial market size potentially positions Up Fintech and Futu for gains similar to those experienced by Robinhood. According to the analysts, Robinhood’s recent stock surge has been significantly fueled by its cryptocurrency trading revenue, which doubled year-over-year in the first quarter, outpacing the company’s overall revenue growth of 50%. The report from Citi also indicates that cryptocurrency’s contribution to Robinhood’s total revenue has expanded from 3% to 21% between 2020 and 2024. Robinhood is scheduled to announce its earnings on Wednesday. Up Fintech and Futu have not yet announced their respective earnings release dates. Citi analysts have also raised their price targets for both stocks, increasing Up Fintech’s target from $9.50 to $14 and Futu’s target from $113 to $176. The increased optimism surrounding Up Fintech stems, in part, from potential collaborations with Avenir Group, an investment firm associated with the founder of the Huobi cryptocurrency exchange. Avenir acquired a 5.9% stake in Up Fintech in late April. Citi stated that there’s potential for Up Fintech if Avenir Group were to designate it as the primary cryptocurrency exchange for over-the-counter (OTC) trading or as its designated custodian bank, potentially generating higher custodian fees to support Up Fintech’s crypto business expansion. However, significant differences exist between the cryptocurrency landscape in the U.S. and Hong Kong. Unlike Beijing’s more cautious approach in mainland China, Hong Kong, as a special administrative region, is serving as a testing ground for maintaining global financial competitiveness. Analysts from Citi and Morgan Stanley believe that the initial emphasis of Hong Kong’s stablecoin support will be on facilitating international payments using the Chinese yuan. Nevertheless, the region’s broader ambitions are becoming evident, highlighted by Eric Trump, son of former U.S. President Donald Trump, being scheduled as a keynote speaker at a bitcoin conference in Hong Kong next month. —CNBC’s Michael Bloom contributed to this report.
