'Old money' may prefer regulated HKD-pegged stablecoins, says Hong Kong gov't official

Quick Take

  • An InvestHK official said that potential Hong Kong dollar-pegged stablecoins may draw demand from institutional investors as “they are not going to buy stablecoins from unregulated entities.”
  • Last month, Hong Kong concluded a consultation for regulating stablecoin issuers.

The regulated nature of potential Hong Kong dollar-pegged stablecoins may be favored by “old money” in competition with the already prevalent U.S. dollar-pegged stablecoins, a Hong Kong government official said.

“When you have the backing of the most reputable regulator — the HKMA — giving you the license, that can actually give a lot of confidence to industry players,” King Leung, head of fintech and financial services at Invest Hong Kong, told The Block in an interview. “I'm not talking about just retail [investors] but also institutional investors, because that's where the big money is.”

Invest Hong Kong, the region's government department for foreign direct investment, aims to “strengthen Hong Kong's status as the leading international business location in Asia,” according to its website.

Leung’s comment comes as Hong Kong launched a “sandbox” arrangement for stablecoin issuers earlier this month to pave the way for future relevant regulations. The Hong Kong authorities had just concluded a consultation on Feb. 29 on regulating stablecoin issuers.

In December, the Hong Kong Monetary Authority, together with the Financial Services and the Treasury Bureau, launched a consultation and proposed that all fiat-referenced stablecoin issuers should obtain a license from the HKMA.

Market demand

With U.S. dollar-pegged stablecoins dominating the stablecoin market, some industry players have questioned market demand for an HKD stablecoin.

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Alessio Quaglini, chief executive officer and co-founder of Hong Kong-based crypto custodian Hex Trust, said there’s no need for a stablecoin in Hong Kong dollars. “I don't think there's space for more than one provider, if any,” Quaglini said.

However, Animoca Brands Chairman Yat Siu said that HKD-pegged stablecoins may secure their unique territory in the already saturated crypto market. “If you want to have another kind of regulated currency that, however, is non-American, but is yet tied to an American system as in the U.S. dollar, I think the Hong Kong dollar becomes a very interesting proxy”, Siu told The Block today in Seoul.

Leung of InvestHK said that as the world is looking to entire the crypto world to “buy stuff on-chain,” the demand for stablecoins will most likely go up.

“If you are, as I said, the institutional people and you have this fiduciary responsibility of your clients' money, you are not going to buy stablecoins from unregulated entities,” Leung added.


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About Author

Timmy Shen is an Asia editor for The Block. Previously, he wrote about crypto and Web3 for Forkast.News from Taiwan after spending more than three years in Beijing covering finance, entertainment business and current affairs at Caixin Global and Chinese tech at TechNode. His China-related reporting has also appeared in The Guardian. When he's not chasing headlines, you'll find him savoring hot pot and shabu shabu in a Taipei local haunt. Timmy holds an MS degree from Columbia University Graduate School of Journalism. Send tips to [email protected] or get in touch on X/Telegram @timmyhmshen.

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