The market heat of virtual currencies continues to rise, and stablecoins are receiving much attention.
On July 18th, the Hong Kong Monetary Authority announced the first batch of participants in the "stablecoin issuer sandbox". The first batch consists of three issuers, including JD Coin Chain Technology (Hong Kong), Yuan Coin Innovation Technology, as well as joint applicants Standard Chartered Bank (Hong Kong), Animoca Brands Limited, and Hong Kong Telecommunications (HKT).
According to the definition of the Hong Kong Monetary Authority, a stablecoin is a virtual asset designed to maintain a relatively stable value with certain assets (usually currencies). In mainland China, "stablecoins" have been repeatedly named by regulatory agencies.
The Hong Kong Monetary Authority stated in a recent consultation summary that it has recognized the importance of anti money laundering and stablecoin security issues and will take more targeted measures.
The RMB world is not a one size fits all approach to the cryptocurrency world. Some financial institution researchers have also suggested strengthening research on offshore RMB pegging to stablecoins.
What considerations are used to layout stablecoins
The three issuers of stablecoins announced by the Hong Kong Monetary Authority actually cover five companies, namely JD Chain Technology (Hong Kong) under JD Group, Yuan Coin Innovation Technology, as well as Standard Chartered Bank (Hong Kong), Animoca Brands, and Hong Kong Telecommunications (HKT) jointly applied for.
In terms of company categories, there are 2 fintech companies, 1 commercial bank, 1 gaming company, and 1 telecommunications company.
In fact, the number of applicants is much larger than the five companies mentioned above. Chen Weimin, Vice President of the Hong Kong Monetary Authority, wrote that since the launch of the stablecoin issuer sandbox in March this year, he has received inquiries from dozens of institutions.
Why are multiple institutions enthusiastic about applying for stablecoin issuer sandboxes, and will this business bring company profits?
This means resources and benefits. Stablecoin issuers have control over the exchange between fiat currency and cryptocurrency, "a cryptocurrency researcher at an investment firm told reporters. According to the official websites of JD Coin Chain Technology and Yuan Coin Technology, the Hong Kong dollar stablecoins to be issued by the two institutions are both pegged 1:1 to the Hong Kong dollar. Their reserves consist of highly liquid assets and are stored in separate accounts of licensed financial institutions, which can be queried through regular disclosure reports.
In terms of company strategic planning, each issuer has their own considerations.
According to a statement provided by JD Group to 21st Century Business Herald reporters, JD Group is positioned as a "supply chain based technology and service enterprise", and its JD Coin Chain Technology aims to provide payment solutions for global enterprises and individuals, solving cross-border payment problems.
According to the official website of Yuanbi Technology, the company's upcoming Hong Kong dollar stablecoin will connect the Web2 and Web3 worlds and market participants. The CEO of the company, Rita Liu, stated that Hong Kong dollar stablecoins will not compete with US dollar stablecoins such as USDT in the future, but will work together with various stablecoins to expand the application scenarios of stablecoins.
Unlike the separate application for the stablecoin issuer sandbox mentioned above, Standard Chartered Bank has chosen to jointly apply with two companies in different fields, Anson Group and Hong Kong Telecom.
A statement from Standard Chartered Bank (Hong Kong) shows that the three companies share a common vision and firmly believe that the digital asset market can grow in Hong Kong and the region in a sustainable, transparent, and risk managed manner. The three parties will actively explore the key role that stablecoins play in the financial and payment markets.
Among them, Standard Chartered Hong Kong is exploring how to support the development of digital assets in Hong Kong in the most effective way, which coincides with the vision of Anshui Group to promote the popularization and application of digital assets and apply blockchain related technology solutions to physical assets and traditional economy. Meanwhile, Hong Kong Telecom is exploring stablecoin support for local and cross-border payment applications through its personal and merchant payment solutions under the group.
How to regulate stablecoins
According to the type of collateral assets and degree of centralization, stablecoins can be divided into three categories: fiat collateralized stablecoins, encrypted asset-backed stablecoins, and algorithmic stablecoins. Compared to Bitcoin, which has a relatively large fluctuation range, stablecoin prices are relatively stable. The Hong Kong dollar stablecoin is a centrally issued fiat collateralized stablecoin.
It is worth noting that there is a significant difference in the attitudes of Hong Kong and mainland regulators towards "stablecoins". In mainland China, "stablecoins" have been repeatedly named by regulatory agencies.
Chen Weimin, Vice President of the Hong Kong Monetary Authority, wrote on the official website of the Monetary Authority that stablecoins can play a role as a trading medium, reduce costs and save trading time. They can also utilize their programmable features to automate and intelligentize financial service processes, facilitate capital flow, and more accurately manage various risks related to transactions. In addition, Web3, gaming, and virtual asset trading also belong to application scenarios.
Among various stablecoin issuers, institutions such as JD Group and Standard Chartered Bank have businesses in both Hong Kong and mainland China. JD Group is listed in Hong Kong, and its e-commerce system represented by JD.com covers consumers in mainland China and Hong Kong. Standard Chartered Bank provides retail and corporate banking services in both Hong Kong and mainland China.
Regarding the compliant operation of stablecoins, some institutions have provided feedback.
The statement provided by JD Group shows that the inclusion of JD Coin Chain Technology as one of the participants in the "sandbox" list does not necessarily mean that it has obtained a stablecoin issuance license. As of now, JD Coin Chain Technology has never issued stablecoins in Hong Kong or other jurisdictions, and any stablecoins related to "JD" that have been issued may also be scams.
The Hong Kong Monetary Authority also stated in its recently released consultation summary that it is aware of the importance of anti money laundering and stablecoin security issues, and will take more targeted measures.
The reporter also noticed that there are interest free lending stablecoin protocols such as Gravita and SturdyFinance on the public chain. Taking Gravita as an example, borrowing stablecoins through this protocol only requires a one-time fee of up to 0.5%. However, the above-mentioned cryptocurrency researchers told reporters that such protocols generally run on ETH and ETH second layer public chains and have no direct relationship with stablecoin issuers.
The RMB world is not a one size fits all approach to the cryptocurrency world. Bank of China Shenzhen Branch Greater Bay Area Financial Research Institute Zeng Shengjun and Bank of China Hong Kong Financial Research Institute Guan Zhenqiu released a report stating that they can summarize the experience of Hong Kong's stablecoin pilot and strengthen research on offshore RMB pegged stablecoins.