Hong Kong mulls yuan-linked stablecoins amid crypto push
The Hong Kong General Chamber of Commerce (HKGCC) has put forward proposals for the upcoming government budget, advocating for the introduction of Chinese yuan-linked stablecoins.
In a statement released Tuesday, the HKGCC suggested that the government should consider allowing the issuance of stablecoins pegged to the yuan, or a mix of various fiat currencies including the yuan, Hong Kong dollar, or U.S. dollar.
Additionally, the HKGCC wants to explore a “Virtual Asset Connect Scheme” with an initial daily limit of HK$20 billion ($2.5 billion), though specific details of the scheme were not disclosed in the proposal.
These recommendations are timely, as the Financial Secretary is expected to present the budget address later this month. The HKGCC said their submission is focused on measures to retain and attract talent and businesses, which is essential for Hong Kong’s operating environment amid manpower shortages.
The push for yuan-linked stablecoins comes amid regulatory developments in Hong Kong. In December, the Hong Kong Monetary Authority proposed a new regulatory framework for stablecoin issuers, like Tether’s USDT and Circle’s USDC, requiring them to obtain a license to operate in the city.
This proposal, detailed in a consultation paper published by the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau, aims to oversee the stablecoin industry more effectively. The regulator clarified that only stablecoins issued by licensed entities could be offered to retail investors.
Under the proposed rules, any issuer of a stablecoin pegged to one or more fiat currencies in Hong Kong must be licensed by the HKMA. Additionally, these licensed issuers will need to be locally incorporated, have a management presence in the city, and establish a settlement mechanism. This mechanism involves maintaining a reserve of high-quality, highly-liquid assets with appropriate custody arrangements.
Hong Kong’s initiative to implement stablecoin regulations as early as this quarter has caught the attention of several key players in the financial sector. Among them is the international arm of Chinese asset manager Harvest Fund Management Co.
The news also comes as Hong Kong is gearing up to test the integration of China’s digital yuan with its domestic Fast Payment System (FPS). This initiative, announced by officials earlier in October, marks the second phase of the e-CNY trials in the financial center.