Stablecoin ‘sandbox’ announced by HKMA
Firms will use facility to test coins linked to fiat currencies, city’s de facto central bank says
Hong Kong’s de facto central bank has announced the launch of a stablecoin “sandbox”, allowing companies to try out cryptocurrency tokens pegged to fiat currencies in the city.
The launch by the Hong Kong Monetary Authority (HKMA) announced on Tuesday fulfils a promise it made in December with the release of its stablecoin consultation paper.
It outlined the rules for issuing and selling such tokens to investors, and came on the heels of the launch of a central bank digital currency sandbox last week.
The sandbox would allow for stablecoin trials “within a limited scope and risk-controlled environment”, the HKMA said, and would allow it to “communicate supervisory expectations and guidance” to potential issuers.
There was no limit on the number of entities that could take part, but applicants must show a “genuine interest in and reasonable plan on issuing fiat-referenced stablecoins”.
Applicants must also have a plan for taking part in the sandbox and show “a reasonable prospect of complying” with the regulations proposed in December, which are still under review after public feedback.
“The sandbox arrangement … will facilitate the formulation of fit-for-purpose and risk-based regulatory requirements, which is key to promoting the sustainable and responsible development of the stablecoin issuance business,” HKMA chief executive Eddie Yue Wai-man said in a statement.
The announcement was quick to attract attention from the industry. Fintech firm RD Technologies, founded by former central banker Norman Chan Tak-lam, said that it welcomed the scheme and was exploring the launch of a token called HKDR that was pegged to the Hong Kong dollar.
This would “facilitate virtual asset trading and tokenised realworld asset settlements, enhance the cost-efficiency of cross-border payments, and enable the access to various on-chain financial services”, the company said.
“We aim to contribute to the development of Hong Kong’s thriving Web3 ecosystem by issuing a stable, trusted and credible Hong Kong dollar stablecoin for multiple business use cases in Hong Kong and beyond,” RD Technologies chief executive Rita Liu said in a statement.