Hong Kong Monetary Authority lists a few ‘benchmark qualification’ for firms planning to launch their own HKD-pegged stablecoins. The requirements would serve as the entry threshold
According to a report by news outlet Hexun, Hong Kong Monetary Authority Chief Executive, Eddie Yue, mentioned a number of requirements that applicants will need to fulfill if they wish to register for an stablecoin issuer license.
He also made it clear that participation in the government’s “sandbox program” is not a pre-requisite, nor is it a guarantee that firms taking part in it will receive licenses. Yue revealed that the first batch of stablecoins will focus on cross-border trade and web3 applications.
“In the face of the current environment, we need to remain resilient. Hong Kong has strong foreign exchange reserves and high liquidity as a buffer,” said Yue.
So far, there are more than 40 applications taking part in the region’s stablecoin sandbox program, which include major players including JD CoinChain Technology, Yuanbi Innovation Technology, and a consortium consisting of Ant Group, Standard Chartered and Hong Kong Telecom through Animoca Brands.
The institutions in the sandbox program have tested their respective stablecoin issuance processes and business models in a controlled environment.
According to Yue, only a handful of licenses will be granted during the initial phase. He said that license applicants will need to propose specific business plans that can be realistically implementable. Not only that, they also need to demonstrate practical scenarios where it can be applied.
Applicants will also need focus on their reserve management capabilities. According to the report, the license holder must have a capital reserve of at least $25 million HKD and must prove its ability to continue operating.
“It is worth mentioning that if the applicant is an “authorized institution” such as a bank, the $25 million HKD capital requirement can be exempted,” said Yue.
They will also need to prioritize and showcase compliance systems such as anti-money laundering systems as well as other security measures.
Previously, the Hong Kong Financial Secretary announced that regulators will start to issue the first batch of stablecoin issuer licenses within the next few months. The new Stablecoins Ordinance, which comes into effect on August 1, mandates that entities must obtain an issuer license from the Hong Kong Monetary Authority.
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