HSBC and ICBC, the world’s leading bank in terms of assets, are looking at the license application of stablecoins in Hong Kong. It comes in the wake of a new regulatory framework of stablecoins in the region. The shift signals the interest of great banks in penetrating into the enrichment of digital currency in Hong Kong. With the licensing process, it’s likely there are going to be massive changes in the local crypto landscape.
The licensing process would then be overseen by the Hong Kong Monetary Authority (HKMA). HSBC and ICBC have both expressed interest in becoming licensed. The new rules allow a limited number of licenses in this first round. Standard Chartered and ICBC may be the first to get the go-ahead, according to early reports.
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The HKMA has made it clear that initially there will be limited licenses issued. Such early endorsements should also provide banks with a first-mover advantage to the stablecoin space. Other institutions have their interest in applying as well. By the end of August, 77 organizations had expressed interest in participating in the licensing process.
Also Read: Ethereum Hits Historic Milestone with $165 Billion in Stablecoins
The Stablecoin Ordinance became effective on August 1. This regulation brought in a six-month transition time. The legislation makes it illegal to engage in the offer or marketing of unlicensed stablecoins to retail investors. This structure would provide protection to investors and help in opening up expanding digital asset space.
By the time the new laws took effect, most of the companies involved with stablecoins in Hong Kong had faced their financial losses. There were some companies that plummeted by up to 20% in one day. Experts in the area have dubbed these losses a healthy correction. According to them, the market is accommodating to the stricter regulations.
Although the new rules have been a shock to some, others have considered them vital in long-term stability. The strict policy in the prevention of fraud by HKMA provides the responsible development. The institutional setup may be deployed in other states in an attempt to regulate the price of digital assets.
In addition to the issue of the licensure of stablecoins, the Hong Kong Securities and Futures Commission (SFC) is also focusing on crypto custody. In mid-August the new cryptocurrency custody guidelines were announced by the SFC. These requirements, though, are better levels of protection and disallowing smart contracts on cold wallets. The purpose is to add security to digital assets and to those investors to mitigate risk.
Global players enticed by the coming of new regulations related to stablecoins Hong Kong has been seen by many as the best example of the regulation of the digital currencies market. With the addition of more banks such as HSBC and ICBC to the market, Hong Kong’s part to play in the future of the stablecoins is only going to be all the more important.
Also Read: Stablecoins Could Disrupt Banks, Similar to 1980s Financial Crisis: Report
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