The Hong Kong Monetary Authority, the territory's central bank, has awarded the first two stablecoin issuer licenses to HSBC and Anchorpoint Financial, a joint venture led by Standard Chartered that includes Animoca Brands, as announced on Friday. According to the Hong Kong Monetary Authority's chief executive, Eddie Yue, the authority looks forward to seeing the licensed issuers launch their operations in line with their plans, exploring growth opportunities while effectively managing associated risks. Yue expressed his hopes that the promotion of regulated stablecoins will address existing challenges in financial and economic activities, create value for individuals and businesses, and support the healthy development of digital assets within Hong Kong. Out of 36 applications, the HKMA selected the first batch of licensees, with Financial Secretary Paul Chan indicating in his February budget address that only a limited number would be approved, prioritizing risk management, reserve quality, and anti-money laundering controls.
The decision to initially license note-issuing banks appears to be deliberate, with HSBC and Standard Chartered being two of the three commercial banks authorized to print Hong Kong dollar banknotes, a system dating back to 1846. In a December 2023 blog post, Yue drew parallels between pre-1935 banknotes issued by commercial banks in exchange for deposited silver, which he referred to as a form of 'private money,' and stablecoins, which serve as their blockchain-based equivalent.
The licenses are subject to one of the world's strictest Know Your Customer (KYC) frameworks for digital money, requiring licensed stablecoins to be transferred only to wallets whose owners have undergone identity verification, with the travel rule applying to transfers exceeding HK$8,000. This implies that Hong Kong dollar (HKD) stablecoins will likely embed compliance checks into their smart contracts, restricting transfers to wallets listed in an on-chain white list, making them structurally different from freely transferable tokens. The bank-led stablecoin model also reflects the HKMA's decision to deprioritize its central bank digital currency for retail use, following an 11-group pilot program that found the retail case to be weak. Stablecoins have become a significant focus, with Standard Chartered CEO Bill Winters stating that Hong Kong's push into stablecoins and tokenized deposits could lay the foundation for a new era of digital trade settlement.
The market's response remains to be seen, given that stablecoins are a $310 billion asset class dominated by USD-denominated tokens. Hong Kong is betting on regulated, bank-issued HKD stablecoins to carve out a role in regional trade settlement, but the question remains whether a non-dollar stablecoin can build the necessary network effects to compete.