Author
Ms XUE WANG
Organisation/Institution
City University of Hong Kong, School of Law
Country
HONG KONG (SAR OF CHINA)
Panel
Banking and Finance
Title
When Code Challenges Law: The Unfavorable Isolation and Potential Characterization of DeFi in Hong Kong
Abstract
The Hong Kong Stablecoins Ordinance has erected a “regulatory firewall” that effectively excludes decentralized finance (DeFi) from its licensed ecosystem. This isolationist policy, however, is more than a regulatory choice; it is a symptomatic manifestation of a fundamental paradigm clash between the centralized logic of traditional financial regulation and the decentralized architecture of DeFi. This paper, through a critical analysis of the Ordinance, is the first to systematically diagnose this clash and map a progressive way out. It argues that the Ordinance’s reliance on a licensed-issuer model exposes the law’s structural inability to conceptualize a liable entity in a decentralized world, creating a regulatory vacuum. The paper then critiques the global regulatory responses, distinguishing between reforms that merely “tame” the new paradigm and those that accommodate it. Finally, it proposes a tripartite regulatory future: establishing immediate “accountability anchors” at the edges of the DeFi stack, pioneering the legal personhood of decentralized autonomous organizations (DAOs) to resolve the core liability dilemma, and ultimately moving toward a long-term vision of “regulation-by-design”, where compliance is embedded into the protocol layer itself. This framework offers a pathway from defensive isolation to adaptive governance, essential for any jurisdiction aiming to foster responsible financial innovation. The paper’s essential contributions are threefold: (i) for policymakers, it provides a pragmatic, phased roadmap for safely integrating disruptive innovation; (ii) for industry participants, it clarifies a potential path to compliance and legitimization; and (iii) for academic discourse, it enriches the jurisprudence of the digital age by applying Kuhn's theory of paradigm shifts to the law, offering a new theoretical lens through which to analyze the ongoing collision between the regulatory forum of subjectivism and the decentralization ecosystem.
Biography
Xue Wang is an independent researcher, currently based in Hong Kong. Wang obtained her Bachelor of Laws at Shanghai University of Political Science and Law in 2022 and Master of Laws at City University of Hong Kong in 2024. She obtained her National Legal Professional Qualification Certificate of PRC in 2022. Wang’ co-authored article “When OFAC Meets the AFSL: U.S. Sanctions in Chinese Courts” with Alexandr Svetlicinii is published in the Washington International Law Journal in October 2025. She used to work as a trainee paralegal in Shanghai, China and currently works as a research assistant both at School of Law, City University of Hong Kong and Faculty of Law, University of Macau. Wang’s research focuses on international law, trade law, fintech law and legal responses to climate change and sci-tech innovation. Her work particularly examines regulatory paradigms towards sci-tech and fintech innovation over different jurisdictions, with a current focus on addressing the regulatory gaps posed by decentralized financial instruments.
