When gold is "trapped" in Dubai, it's time to boldly "bullish" on Hong Kong

Written by: Farmer Frank

Dubai's gold has recently begun to show a rare "negative premium."

According to sources cited by Bloomberg, due to the ongoing impact of conflicts in the Middle East, many Dubai gold traders are selling off their inventories at a wholesale price $30 per ounce lower than the London benchmark price, as they cannot ensure timely delivery and want to avoid indefinitely bearing storage and financing costs.

Although this "negative premium" for gold is mainly concentrated at the wholesale level and has not yet affected retail gold prices, it is almost never seen in a normal market. Gold has always been regarded as one of the most liquid physical assets globally; theoretically, as long as there is a significant price difference, arbitrage funds will quickly transport it to markets with higher prices, correcting any price discrepancies.

However, this time, the arbitrage channels have been brutally cut off by the realities of the world.

This easily brings to mind the "negative oil prices" that occurred in the oil market in 2020, with the underlying logic being similar: when the delivery of physical assets incurs high transportation, insurance, and storage costs, and faces great uncertainty, there will be a misalignment between "paper prices" and "actual value."

In other words, gold is just one facet; the underlying issue is that the entire asset flow channel is problematic, which also means that Dubai, as a global offshore financial center, is facing a functional stress test.

1. The Flames of War Reach Dubai: A Cold Reflection on "Offshore Financial Centers"

Let me share a cold fact: Dubai is not only a "safe haven" for global wealth but also one of the most important transshipment trade hubs in the global gold market.

According to customs and trade data, Dubai imported 1,392 tons of gold in 2024, with a total value exceeding $100 billion, and its export scale reached as high as $74 billion, making the UAE the second-largest gold import and export center in the world. For instance, a significant proportion of gold mined in Africa and refined in the UAE, as well as gold transiting from Switzerland and London to Asia, must pass through Dubai.

It is noteworthy that if we pull up the historical curve of Dubai's gold trade volume, we will find that 2022 was an extremely significant turning point. At that time, with the outbreak of the Russia-Ukraine conflict, Dubai's gold import and export scale suddenly accelerated, as a large amount of capital and physical assets that originally flowed through the European system sought new routes through Dubai due to sanctions, compliance, and geopolitical fragmentation.

This is actually a microcosm of Dubai's rise: the crisis of others is precisely its window of opportunity.

As a trade hub connecting Asia, Europe, and Africa, Dubai has attracted wealth from around the world over the past two decades through capital free flow, low tax rates, and a relatively stable political and business environment—ranging from Russian oligarchs to global family offices and Middle Eastern oil capital, all viewing it as an important node for asset storage, clearing, and circulation. More critically, with each external geopolitical upheaval, Dubai often emerges as a beneficiary.

However, this time, the wind has blown towards Dubai itself.

Source: Bloomberg

The essence of "finance" is the flow of funds, and the prerequisite for this flow is that assets can move efficiently and safely.

Therefore, when physical circulation channels are blocked, the impact will not be limited to the gold market; all physical and financial assets that rely on cross-border movement will face the same predicament. Behind this lies a more fundamental question—what is the first principle of offshore financial centers?

The answer is quite simple: safety.

It is not about tax rates, not about ease of registration, and not about relaxed regulation; these are all second-tier competitive advantages. The primary reason funds are willing to dock at a financial center is always the most basic question: can your money be withdrawn at any time, and can it be safely transferred when needed?

Once this underlying assumption shows cracks, the entire value system will begin to loosen. The inability to transport gold is merely the first visible signal of this "certainty" cracking.

It is important to understand that the status of offshore financial centers has never been secured by merely a plaque stating "International Financial Center"; rather, it is the result of repeated validation and selection through one crisis after another. Each major geopolitical shock is, in fact, a covert "re-tendering," where capital reassesses where is safer, where "certainty" is more trustworthy, and then irreversibly shifts its chips in that direction.

Historically, such migrations have occurred more than once.

Beirut was once the financial center of the Middle East until war destroyed it; Hong Kong experienced a wave of capital outflow before 1997, only to rebuild trust later due to the stability of its system. The rise and fall of offshore financial centers has never been a slow linear process; it often appears calm for a long time, only to shift its focus at an unexpected speed after reaching a certain critical point.

From this perspective, offshore financial centers like Dubai, Singapore, the Cayman Islands, and Switzerland have their prosperity built on a common historical background: "peaceful globalization." They often lack a large domestic industrial system and do not possess military power sufficient to support financial hegemony. Their financial status largely derives from the stability of the global order; in a sense, they benefit from the "peace dividend" amid great power competition.

However, when the world shifts from "peaceful globalization" to a new model of "great power competition, rule reconstruction, and geopolitical priority," the risk premiums of these financial nodes will inevitably be re-priced.

As revealed by the current conflict in the Middle East, a city that heavily relies on external continuous supply for food, water, energy, and even financial clearing chains will see its vulnerabilities magnified exponentially once external channels are systematically cut off.

There has never been a truly neutral entity detached from power structures. Offshore must ultimately rely on a larger order and stronger security backing.

When this logic is re-understood, the paths for capital to seek safety will also change, leading to the question: if cracks appear in Dubai, where will the next stop be?

2. Dubai Falls: Who is Qualified to Feast?

Theoretically, there are not many options.

Return to Europe and the U.S.?

Not necessarily realistic, as a large amount of capital originally flowed out from Russia, Europe, and the U.S. precisely to avoid sanction risks, political risks, and stronger regulatory pressures. Choosing to settle in Dubai was a way to evade these risks; "returning" would merely expose them to the very risk structures they sought to avoid.

Turn to Singapore?

On the surface, this seems logical, as Singapore has always been Dubai's most direct competitor, but this also means that it is, to some extent, the "Southeast Asian version of Dubai," small in scale, lacking strategic depth, and highly dependent on external factors, while remaining within the range of the U.S. political system. Additionally, under the compliance pressure from the FATF, the thresholds for opening accounts and review requirements have tightened in recent years. For some high-sensitivity, strong cross-border capital, Singapore may not be without appeal, but it may not be able to accommodate all overflow demands.

In this context, Hong Kong is re-emerging in more and more discussions. Friends from licensed virtual asset institutions in Hong Kong have reported to me that the volume of business inquiries from the Middle East and related regions is visibly increasing, primarily not from retail traders but more from family offices, cross-border trade settlement platforms, and foreign trade companies.

Hong Kong is quietly absorbing the risk-averse capital overflow from the Middle East conflict.

Structurally, Hong Kong indeed possesses a unique "combinatorial advantage" in the current international market landscape, acting as a free port for financial capital while also having a comprehensive financial governance and regulatory system.

• The first card is the institutional foundation of a capital free port: Hong Kong maintains a peg between the Hong Kong dollar and the U.S. dollar, allowing for high freedom of capital movement. More critically, compared to some offshore nodes that purely rely on a globalized environment, Hong Kong is backed by a large economy and a mature financial system, providing stronger institutional continuity and safety expectations.
• The second card is a highly mature currency governance system and linked exchange rate system: For global funds, the U.S. dollar remains the core trading currency. Whether for corporate clearing, trade financing, or foreign exchange conversion, Hong Kong adopts a linked exchange rate system pegged to the U.S. dollar and Hong Kong dollar, with mature U.S. dollar liquidity infrastructure, which gives it a natural advantage in accommodating cross-border funds today.

In addition, this round of opportunity for Hong Kong hides a deeper layer of logic—one that is precisely the most intriguing aspect of the Dubai gold discount event.

As mentioned above, the fundamental reason why Dubai gold can only be sold at a discount is not that gold has lost its value, but that the transfer of physical assets heavily relies on physical world channels—flights, ports, insurance, storage. As long as any one of these conditions encounters a problem, even the most standardized and "hard currency" assets can lose liquidity in an instant.

So, is there an asset that can achieve instantaneous transfer and 24/7 settlement without relying on logistics and traditional cross-border friction, thereby reducing various capital losses and maximizing cost efficiency, even when flights are grounded and transportation is obstructed?

Yes. Virtual assets on the blockchain, especially stablecoins.

Stablecoins represented by USDT/USDC can complete cross-border value transfers within minutes, without relying on logistics, needing storage, and experiencing almost no border friction. When the review chain of traditional banking systems is lengthened due to geopolitical risks, when compliance costs surge, clearing efficiency declines, and even in extreme cases, there is a risk of chain breakage, this "frictionless, borderless, 24/7" settlement method demonstrates an almost overwhelming advantage.

This is another core logic behind the current Middle Eastern capital's renewed interest in Hong Kong.

They may not be seeking to speculate on crypto assets themselves, but rather looking for a more efficient and safer settlement and foreign exchange alternative outside the traditional banking system. Hong Kong just happens to have one of the clearest, most compliant, and financially connected digital asset markets globally. For many Middle Eastern funds, what they are truly seeking is a financial node that possesses a stable regulatory environment, U.S. dollar liquidity, and on-chain settlement capabilities.

As the competition among offshore financial centers overlaps with this new variable of virtual assets, the hand that Hong Kong holds is becoming increasingly difficult to replicate.

3. The "Historic Train" of Hong Kong × Virtual Assets

It is no exaggeration to say that since the Hong Kong SAR government issued its virtual asset policy declaration on October 31, 2022, Hong Kong may be welcoming a rare historical window where "timing and location" align, marking a truly "historic train" for Hong Kong.

In the global financial system, Hong Kong has long played an important role in connecting Eastern and Western capital. Its strength has never been merely to act as a local market, but rather to organize funds with different systems, currencies, and risk preferences into a calculable, connectable, and clearable framework, allowing them to flow efficiently.

This capability is equally applicable in the era of crypto finance and has even become more scarce.

As is well known, Hong Kong has been continuously building new digital financial infrastructure for over three years, striving to connect the earlier financial infrastructure ecosystem, which includes local licensed trading platforms (VATP) represented by OSL HK and Hashkey Exchange, along with their custodial, tokenization services, and deep connections with the traditional financial system, resulting in a number of licensed virtual asset service platforms (VASP).

More intriguingly, at the same time that the global geopolitical order is rapidly restructuring, Hong Kong's virtual assets, especially the regulatory framework for stablecoins, have gradually reached the "last mile" after years of deliberation:

• Regulatory consultations began in 2022;
• A regulatory sandbox test will be launched in 2024;
• On May 21, 2025, the Legislative Council of the SAR passed the "Stablecoin Bill";
• On August 1, 2025, the "Stablecoin Ordinance" will officially take effect;
• By March 2026, the first batch of stablecoin licenses will be on the verge of being issued;

In comparison to major global financial centers, this is already one of the most systematic and robust regulatory frameworks for compliant fiat stablecoins to date, and it is ahead of similar legislation in many major economies, including the U.S.

According to signals previously released by the Hong Kong Monetary Authority, the first batch of stablecoin issuer licenses is expected to be issued in early 2026, with a limited initial number of licenses and high entry thresholds and ongoing regulatory requirements, aligning with bank-level standards. Because of this, Hong Kong's stablecoin licenses are likely to become one of the most valuable compliance credentials in the global digital finance sector. On-chain stablecoins are no longer just a niche topic in the crypto-native world; they are accelerating towards becoming a new mainstream tool for reshaping cross-border payments and global trade settlement infrastructure.

For the cross-border funds flowing into Hong Kong from the Middle East, this emerging stablecoin ecosystem represents far more than just a new investment category; it signifies the emergence of a new clearing and settlement channel that operates around the clock, with sovereign-level compliance backing, and is not constrained by physical borders, especially when traditional banking systems face prolonged reviews and even the risk of chain breakage due to geopolitical friction.

As mentioned earlier, the business inquiries from the Middle East are primarily not about simple retail native cryptocurrency trading but more about large transactions and cross-border trade settlements at the enterprise and institutional level.

These demands are also giving rise to a new role for licensed institutions in Hong Kong.

At this stage, the Hong Kong virtual asset market, in terms of connecting institutional and enterprise trade settlement needs, can be most comprehensively observed through OSL Group (863.HK), which owns Hong Kong's first compliant licensed trading platform and has a global compliant channel and payment and trading network. Just before the "Stablecoin Ordinance" officially took effect in Hong Kong, OSL Group launched three new products aimed at institutions: the compliant stablecoin management platform StableX, asset tokenization service Tokenworks, and enterprise-level crypto payment solution OSL BizPay. This year, OSL Group also launched a compliant U.S. dollar stablecoin, USDGO, which meets U.S. federal regulations and can be compliantly distributed in Hong Kong, primarily targeting cross-border e-commerce, bulk trade, and interactive entertainment sectors.

This is clearly no longer limited to traditional exchange business; it is beginning to extend into compliant stablecoin management, asset tokenization, and enterprise-level payment solutions. In a sense, it highlights the essence of the issue: in this round of competition, compliant virtual asset platforms are not just competing on transaction matching capabilities but on who can recognize and grow into the next-generation infrastructure node for cross-border global capital flows.

In Conclusion

The more turbulent the world becomes, the more expensive certain assets, certain systems, and certain paths become.

The chain reactions brought about by the situation in Iran are still fermenting; this time, no one knows where the endpoint is, but it is almost certain that: some opportunities, once lost, are hard to regain; some paths, once formed, will bring strong inertia.

In the past, discussions about Hong Kong's virtual asset market often lingered within the narrative framework of a "compliance model"—in a sense, it was a policy testing ground, a frontier of regulatory exploration, but it had not truly integrated deeply with the underlying logic of global capital flows.

In the early stages of launching compliant Hong Kong dollar stablecoins, the retail demand and scenario expansion on the C-end will likely be the initial focus of regulatory authorities and licensed institutions. However, this does not mean that stablecoins issued or distributed compliantly in Hong Kong cannot seek broader real landing demands and possibilities. This is not something that can be achieved overnight, but sometimes, the arrival of opportunities can come much faster than expected. Whether one can seize and achieve breakthroughs depends on who is prepared.

With the accelerated restructuring of geopolitical landscapes, rapid changes in financial markets, and the formal formation of stablecoin regulations, the significance carried by licensed virtual asset platforms in Hong Kong is being rewritten. This is not only an opportunity for Hong Kong but, to some extent, could also be a historic moment for Hong Kong and various licensed virtual asset institutions to deeply embed themselves in the global trade cross-border payment and settlement system.

The objective conditions are already in place, the policy framework is closing, and the infrastructure is accelerating to take shape. The only remaining question is:

Can Hong Kong truly play this hand well?