Citi Initiates Coverage on OSL with 'Buy' Rating, Highlighting Hong Kong's Regulated Crypto Growth

Executive Summary

Wall Street bank Citi initiated coverage on crypto exchange OSL with a "buy/high risk" rating and a HK$21.80 price target, underscoring its pivotal role in Hong Kong's regulated digital asset landscape and signaling increasing institutional confidence.

The Event in Detail

Citi's initiation of coverage on OSL (0863.HK) with a "buy/high risk" rating and a price objective of HK$21.80 ($2.80) emphasizes the firm's strategic position within the digital asset sector. Analysts highlighted OSL's status as a regulated digital-asset trading and payments platform, anticipating substantial growth driven by institutional crypto adoption and the expansion of stablecoin-related products.

OSL reported HK$195.4 million ($25.1 million) in total revenue for the first half of 2025, marking a 58% year-over-year increase. Core business income escalated by 187% year-over-year, reaching HKD 189 million. The company's total transaction volume reached HKD 68.2 billion, a 200% year-over-year increase, while assets under custody rose by 50% to HKD 5.694 billion. The new business line, OSL Pay, launched in April 2025, contributed HKD 55.94 million, accounting for 29% of total revenue.

OSL's regulatory milestones include securing approval from Hong Kong's Securities and Futures Commission (SFC) in August 2025, coinciding with the implementation of the Stablecoin Issuance and Management Ordinance. The firm has also introduced institutional-grade products such as StableX, a stablecoin issuance and management platform; Tokenworks, an asset tokenization platform; and OSL Biz Pay, a crypto payment solution for enterprises, which includes a zero-slippage fiat-to-stablecoin gateway.

Deconstructing Financial Mechanics and Business Strategy

OSL's financial performance reflects robust expansion, propelled by both organic growth and strategic acquisitions, such as the purchase of Banxa Holdings for $62 million and a share purchase agreement for a 90% stake in an Indonesian crypto exchange. This expansion led to increased operating expenses, with the company's staff size growing from 167 employees in June 2024 to 568 in June 2025. This growth resulted in a loss from continuing operations of HK$20.3 million ($2.6 million).

OSL maintains a significant market share in Hong Kong's virtual asset custody, managing HKD 1.313 billion, representing over 60% of the total assets under management (AUM) for Hong Kong virtual asset spot ETFs, which collectively surpassed HKD 2.157 billion. The firm's custody of ChinaAMC Bitcoin ETF (3042.HK) and Harvest Bitcoin Spot ETF (3439.HK) accounted for over 85% of the Bitcoin ETF market trading volume, while its custody of Ethereum ETFs covered over 64% of that market.

OSL's business strategy is anchored in regulatory compliance, as evidenced by its holding of over 50 licenses across 10 jurisdictions. This positions the firm as a trusted intermediary within the regulated digital asset space. This approach aligns with the stringent stablecoin regulations implemented in Hong Kong, which are setting a global benchmark. The development of StableX and Tokenworks leverages OSL's licensed infrastructure to offer compliant issuance, custody, and tokenization solutions for financial institutions, aiming to reduce barriers to entry for asset managers.

Market Implications and Broader Context

Citi's endorsement is anticipated to reinforce bullish sentiment and attract further institutional and retail investment into regulated crypto platforms and ETFs, potentially influencing future price movements for digital assets. The regulatory-first approach adopted by OSL, particularly with its stablecoin infrastructure, sets a precedent for the broader Web3 ecosystem, with the potential to accelerate the integration of compliant digital assets within traditional financial frameworks.

Growing inflows into cryptocurrency exchange-traded funds, with Bitcoin ETFs attracting over $58.4 billion in total and Ethereum ETFs nearly $14 billion, signify increasing institutional demand and market maturation. Traditional financial institutions like Citi are actively exploring stablecoins, with the bank reportedly considering the issuance of a "Citi stablecoin" to modernize operations and unlock new revenue streams. This trend suggests a global movement toward instantaneous payments and settlements, with stablecoins poised to play a crucial role, contingent on evolving regulatory clarity, as noted by Citi's head of services, Shahmir Khaliq.

Hong Kong's proactive regulatory stance, including its Stablecoin Issuance and Management Ordinance, positions it as an emerging hub for digital asset-based financial products, fostering confidence for institutional adoption. The positive outlook from major financial institutions such as Citi, combined with the development of robust regulated infrastructure by firms like OSL, indicates a long-term trajectory toward deeper integration of digital assets into the global financial system.