HSBC launches HKD stablecoin RedCoin on PayMe, shifting businesses’ focus from interest to settlement time

1. Introduction

On October 23, 2026, HSBC launched its Hong Kong dollar stablecoin, RedCoin, on PayMe. HSBC said that more than 3.3 million PayMe users would be able to open a stablecoin wallet within the app in the coming days for transfers and payments. After the news emerged, the most common questions were how this coin differs from bank deposits and whether it pays interest.

This question reveals a common misinterpretation: people are measuring a settlement tool by the standards of savings. For most businesses, the value of a stablecoin lies not in yield but in settlement—that is, the moment when funds become available. Fixating on interest means focusing only on the decimal point while overlooking the settlement date.

2. Three Different Things: Deposits, Stored Value and Stablecoins

Hong Kong’s Stablecoins Ordinance expressly provides that anything constituting a deposit under the Banking Ordinance is not a stablecoin, and that stored value under the Payment Systems and Stored Value Facilities Ordinance is also not a stablecoin. Deposits, stored value and stablecoins are three different regulatory regimes.

A deposit is money owed by a bank to the holder and carries interest. Stored value is a prepaid balance, such as the balance on an Octopus card. A stablecoin is a digital token issued against independently segregated reserves and redeemable at par. All three may appear as one Hong Kong dollar on a screen, but the underlying promises differ: a debt, a prepaid balance, and a reserve-backed redemption promise.

The Hong Kong Monetary Authority (HKMA)’s regulatory guidelines impose three requirements on licensed stablecoin issuers: reserves must be sufficient and segregated from the issuer’s own assets; holders must have the right to redeem at par, and unless otherwise approved, valid requests must be processed within one business day; and no interest may be paid.

For businesses, the second rule is the key. It gives the liquidity commitment of a licensed stablecoin statutory force: if a redemption is requested today, the funds can normally be received within one business day. This certainty is a core attribute of a settlement tool and is also key to interpreting this news.

3. Businesses Do Not Lack Interest; They Lack Float Time

Interest and business settlement are not on the same scale. The “Time to Cash” study conducted by PYMNTS and JPMorgan Chase offers one perspective: over the past year, 80% of companies shortened their cash conversion cycles, by an average net reduction of 3.7 days; 94% of companies used at least one artificial intelligence (AI) tool for cash-flow management. The speed at which finance teams operate within areas they control is increasing.

The same study also recorded another side of the picture: customers are extending payment terms, while suppliers are becoming less reliable than before. Some of the time saved internally by finance teams is being consumed again by external friction. Among the sampled companies, the fastest companies had cash conversion cycles of 60 days or less, with 55% in the 0-to-30-day range. The gap between leaders and laggards is not whether they have cash, but how quickly they can turn funds from being in transit into being available.

Interest is visible and usually small. Float time is invisible and often substantial. The cost of a payment arriving one day late is higher than the return lost for that day. Using interest to measure a settlement tool is using the wrong yardstick.

4. Which Part Does a Stablecoin Actually Eliminate?

To understand the value of stablecoin settlement, it is first necessary to break down where traditional cross-border settlement is slow.

Under the traditional route, a cross-border payment generally proceeds as follows: the customer initiates a payment, and the sending bank processes it; the funds enter cross-border clearing and pass through intermediary and correspondent banks subject to time-zone constraints; after arrival, the business converts the funds and posts them to its account. The clearing stage usually takes one to two business days and is the largest source of delay.

Stablecoin settlement replaces this clearing stage with an on-chain transfer: the customer pays on-chain, and the funds arrive within minutes, without being limited by correspondent banks’ business hours. However, the subsequent conversion and posting steps still need to be completed through a bank or licensed institution, and stablecoins cannot eliminate this period.

Therefore, stablecoins eliminate the middle clearing stage, not all stages. For example: an overseas payment of HKD 100,000 might be in transit for one to three business days through the traditional route; with stablecoin settlement, on-chain arrival is measured in minutes, while the remaining time is used to convert the stablecoin back into Hong Kong dollars and complete posting. If the conversion channel is compliant and efficient, the entire process can be completed within one day. The main saving is the one to two days spent on clearing. (For illustrative purposes only; this does not represent the actual processing time of any institution.)

The value of the days saved depends on the scale of the company’s capital and its cost of funds. Using an annual cost of funds of 5% as a rough reference, the opportunity cost of HKD 1 million being in transit for two days is approximately HKD 270; for high-frequency, high-value settlements, this figure increases linearly with transaction volume. This is why large B2B fund flows are far more sensitive to settlement speed than small consumer payments. (For illustrative purposes only.)

This example implies one conclusion: the total duration of stablecoin settlement ultimately depends on the efficiency of fiat channels. No matter how fast the on-chain transfer is, slow conversion and posting will consume the time saved. This is where service providers differentiate themselves.

5. Why Would HSBC Issue a Product That Pays No Interest?

Once it is understood that stablecoins eliminate clearing time, HSBC’s motivation becomes clear. Placing a stablecoin on PayMe is not intended to generate interest income; licensed stablecoins cannot pay interest. The aim is settlement infrastructure within the PayMe ecosystem: enabling funds to move among 3.3 million users and between payments and settlement with less friction. For banks, this extends competition from attracting deposits to building settlement networks.

A white paper jointly published by Money20/20 and FXC Intelligence reveals the essence of this competition: cross-border payments are shifting from “who owns the payment channels” to “who sets the rules and assumes compliance responsibility.” An HKD stablecoin relies on Hong Kong’s licensing, reserve and redemption rules. It is precisely this framework that distinguishes it from unlicensed tokens and is the reason HSBC is willing to endorse it.

Hong Kong’s path was not achieved overnight. The Payment Systems and Stored Value Facilities Ordinance established a licensing regime for stored value facilities in 2015; in 2022, the Hong Kong Monetary Authority issued a discussion paper on crypto-assets and stablecoins; following the depegging of TerraUSD and the brief fall of USDT to USD 0.95, the Hong Kong Monetary Authority pledged to regulate stablecoins more comprehensively. The launch of RedCoin means that this framework has moved from paper to product.

For the industry, the voluntary issuance of a non-interest-bearing stablecoin by a traditional banking giant is itself a signal: stablecoins are moving from speculative assets toward settlement infrastructure, and the compliance threshold will rise accordingly.

6. What Does This Mean for Merchants?

For cross-border merchants, this news can be translated into three specific questions.

First, which part of my receivables is most affected by float time? Not every payment is worth switching payment channels for; the greatest benefits come from fund flows that are largest in amount, highest in frequency and under the greatest cash-flow pressure.

Second, what is the total duration if settlement shifts to stablecoins? Focus on the entire route, not just the on-chain arrival time. The efficiency of fiat conversion and posting determines whether the time saved can actually be realized.

Third, what is the total cost? On-chain fees, conversion rates and foreign-exchange markups together constitute the real cost; comparing only one component is why merchants are misled by superficial figures.

DogPay answers these three questions within one system: stablecoin in, fiat out, with funds settled to a DogPay balance or account. Merchants can view settlement time, arrival status and total cost in the same system, without having to check on-chain transfers, conversion and posting in three separate places.

HKD stablecoins also have limitations. They currently serve Hong Kong’s local ecosystem and the PayMe context, while cross-border settlement will depend on merchant onboarding, banking partnerships and anti-money-laundering (AML) requirements. Treating this launch as meaning that cross-border settlement has been solved would be another misinterpretation. Its value lies in opening a path.

7. Conclusion

Returning to the original news: a bank has issued a non-interest-bearing Hong Kong dollar stablecoin, yet the market is asking how it differs from a deposit.

The more worthwhile questions are different: how much float time can it eliminate from a merchant’s cash cycle, and which service provider can combine on-chain speed with the compliance efficiency of fiat channels to compress this time.

For businesses, instead of asking whether a stablecoin pays interest, it is better to first measure how long their funds remain in transit. Saving that one day is usually worth more than the interest.

References:

 HSBC, RedCoin launch announcement (October 23, 2026);

 Hong Kong Monetary Authority, Licensing of Stablecoin Issuers (April 10, 2026) and regulatory guidelines under the Stablecoins Ordinance;

PYMNTS Intelligence, Time to Cash (October 2026);

Money20/20 and FXC Intelligence, North America's Cross-Border Payments Rewiring (2026).

Disclaimer: This content is for reference only and does not constitute legal, financial or investment advice. Third-party data is cited as available at the time of access. Service availability and data may change at any time and may vary by jurisdiction.