Hong Kong Welcomes Crypto With New Initiative For Stablecoin Issuers

Freelance Journalist

Andrew Throuvalas

Freelance Journalist

Andrew Throuvalas

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Andrew is a journalist and content writer with a passion for Bitcoin. His work has been featured with Cryptonews, Decrypt, CryptoPotato, and Bitcoin Magazine, among others.

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April 5, 2024 14:54 EDT

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Hong Kong crypto adoption is taking another leap forward at ZA Bank, where executives are in talks to start providing direct banking services to several stablecoin issuers.

As reported by BNN Bloomberg, Alternate Chief Executive Devon Sin said the virtual lending firm would provide fiat reserve accounts to such firms once they’re officially approved access to the Hong Kong Monetary Authority (HKMA)’s regulatory sandbox. The company is already speaking to over five corporate clients who are considering a stablecoin offering.

ZA Banks Welcomes Stablecoin Issuers

“Stablecoin use cases are very diverse, be it in wholesale or retail markets, tokenization, settlement for exchange trading, or to tackle overseas remittance pain points,” Sin said. “We are keen to explore how to put them into real-world use with the potential issuers.”

Stablecoins are cryptocurrencies backed one-to-one with fiat currencies or other relatively “stable” assets, such as the US dollar. They provide many of the same benefits as cryptocurrencies like Bitcoin (BTC) including global access and convenient cross-border transfers, but without the volatility that steers many away from such assets.

Reliable stablecoins require 100% backed reserves to keep the assets pegged, usually consisting of cash, cash equivalents, and short-term US treasuries. As such, regulation of stablecoins has become a top priority among monetary authorities worldwide, ranging from reserve requirements to money laundering controls.

“With these new services, we’re directly addressing the unique challenges faced by stablecoin issuers, ultimately promoting growth and stability within the web3 economy,” Sin told CoinTelegraph.

ZA Bank has actively pushed for more web3 involvement, processing over $1 billion in transfer volume from web3 clients in 2023. Before that, it participated with approximately 100 local crypto firms as part of Hong Kong’s regulatory sandbox.

Hong Kong Crypto Adoption

Unlike its neighbors in China, Hong Kong is pushing to restore its appeal as a crypto hub by welcoming digital assets and establishing clear regulations for the industry.

In December, the HKMA issued a consultation paper regarding its proposed stablecoin legislation framework, which would include a licensing regime for stablecoin issuers. One of its proposed requirements is for all circulating stablecoins to be backed by reserves “at least equal to the par value.”

Earlier last year, Hong Kong introduced a licensing regime for digital asset trading platforms, and more recently showed openness to permitting Bitcoin spot ETFs to launch within the region.