Regulators Gatekeep as Giants Vie for Hong Kong’s Stablecoin Stakes

Industrial and Commercial Bank of China (Asia) has announced its intention to apply for a stablecoin license from the Hong Kong Monetary Authority (HKMA), marking the second major Chinese financial institution to do so after Bank of China (Hong Kong). The move underscores the increasing interest among traditional banking entities in the Hong Kong market to participate in the development of stablecoins, a digital asset class backed by fiat currency to ensure price stability [1].

HSBC, one of the largest international banks operating in Hong Kong, has similarly expressed its intent to apply for a stablecoin license. However, it remains uncertain whether the bank will formally submit its application by the end of the month. This development signals a broader trend of established financial institutions exploring regulated opportunities in digital currencies [1].

According to recent statements by the HKMA, the regulator plans to issue only a limited number of stablecoin licenses in the initial phase of its licensing program. Despite this, the demand for such licenses has been robust, with as many as 77 institutions having indicated their intent to apply by the end of last month. This high level of interest highlights the competitive nature of the stablecoin market in Hong Kong and the potential regulatory hurdles applicants may face [1].

The HKMA’s cautious approach to granting licenses reflects broader global concerns over the risks associated with stablecoins, including liquidity, operational resilience, and compliance with anti-money laundering (AML) and counter-terrorist financing (CTF) standards. By limiting the number of licenses issued in the first phase, the regulator aims to ensure that only the most prepared and compliant institutions enter the market, which could help build public and institutional trust in stablecoin systems [1].

The potential entry of ICBC (Asia) and HSBC into the stablecoin ecosystem could have significant implications for the Hong Kong financial market. Both banks bring substantial resources and a strong compliance infrastructure, which could contribute to the development of a more robust and transparent stablecoin framework. Their participation may also encourage other traditional financial players to consider similar moves, provided they meet the stringent regulatory requirements set by the HKMA [1].

As the application process unfolds, market participants and observers will be closely watching how the regulator evaluates the proposed initiatives and what criteria will be prioritized in the licensing decision. The ultimate outcome could shape the trajectory of stablecoin adoption in Hong Kong and influence cross-border digital currency initiatives in the Greater China region.

Source:

[1] Odaily Planet Daily (https://www.odaily.news/en/newsflash/446964)