The HKMA's consultation on legislation to regulate stablecoin issuers will end at the end of this month, and many financial institutions are preparing to submit applications and participate in the sandbox. Among them, First Digital Group issued the US dollar stablecoin FDUSD in Hong Kong last year. It is now traded on four virtual asset platforms, with daily trading volume exceeding US$4 billion. Vincent Chok, CEO of First Digital Trust, expects that the regulatory sandbox will accept applications at the end of the month and will submit application documents at that time. Currently, the stablecoin is mainly used for virtual asset transactions, and it is hoped that it will be used for payment purposes in the future. If a license is obtained, it will study the issuance of stablecoins in Hong Kong dollars and other currencies.
B2B model does not sell to retail investors
Chok said in an interview that FDUSD is a B2B model and is not sold to retail investors. Its clients are over-the-counter trading companies, market makers, etc. Clients will put FDUSD into secondary markets such as exchanges. It is currently listed on four virtual asset platforms such as Binance and is mainly used for virtual currency transactions. He gave an example that if two non-stable coins, such as Bitcoin and Solana, are directly paired, the prices of both are very volatile, while the price of the US dollar stablecoin is relatively stable and can be used as a transaction intermediary. He revealed that the current market value of FDUSD is US$4 billion, and the daily trading volume once exceeded US$26.5 billion.
Regarding the USDT and USDC stablecoins currently on the market, Chok said that the most important factor is to confirm the reserves held behind them and the credibility of the company. The issuing company of FDUSD is FD121 Limited, and the issuance and custody are separated, and the reserves are invested in government bonds for profit.
Hope to partner with local companies to issue credit cards
He said that issuing in Hong Kong would make it easier to provide instant redemption services to customers across the Asian time zone, and the U.S. dollar is the world's dominant currency and has always been the most popular. In addition, investing U.S. dollar reserves in government bonds currently enjoys high interest rates, so it is profitable.
In addition to trading, he hopes that FDUSD can be used for payment functions in the future, even cross-border remittances and e-commerce settlements, and intends to cooperate with local companies to issue credit cards to settle bills with FDUSD. He admitted that if a license is issued, he will study the issuance of Hong Kong dollar stablecoins. Since US regulators are very aggressive, if exchanges or companies do not want to be affected, they can use Hong Kong dollar stablecoins for transactions. As for FDUSD being bought and sold on the unlicensed Binance platform, the issuer's job is to issue tokens, and Bitcoin and Ethereum are also bought and sold on unlicensed exchanges. "How can you say that (FDUSD) cannot be traded on unlicensed exchanges?" He emphasized that he would ensure that the funds of B2B customers comply with anti-money laundering laws and KYC (know your customer) regulations, and hoped to participate in the regulatory sandbox.
VSFG, another financial institution that plans to participate in the sandbox, is preparing to launch a Hong Kong dollar stablecoin. Li Kaixiang, senior consultant and head of stablecoins at VSFG, said that the current stablecoin market is dominated by US dollar assets. "At the beginning, everyone has confidence in the US dollar, but it will not always account for 99%. There will be great development in the middle of the market." He said that other currencies are expected to fill the space, and the Hong Kong dollar will occupy a unique position. He hopes to establish a Hong Kong dollar stablecoin in the early stage, open up the international market, and provide local use cases. He believes that the Hong Kong dollar has great advantages.
Li Kaixiang explained that the Hong Kong dollar stablecoin can be used to purchase different digital products and tokenized traditional assets, and its programmable characteristics can also be used to design small shop point reward programs. He also mentioned that stablecoins should no longer be "wallet-opening" but should be embedded, for example, users can directly use stablecoins on their existing payment tools or credit cards, and they will look for ecosystem partners to cooperate in launching use cases.
Yuancoin, founded by former HKMA chief Norman Chan, is also studying the launch of a Hong Kong dollar stablecoin. Norman Chan once mentioned that if approved by regulators, it can be issued in a short period of time, and related assets can be listed on virtual asset platforms for trading and used as payment.
Source: Today's Economic Times