On May 5, the Hong Kong Legislative Council passed the Stablecoin Bill (hereinafter referred to as the "Bill"). Based on the bill, Hong Kong will formally establish a licensing system for issuers of legal currency stablecoins. This has become another milestone in promoting the issuance of stablecoins in Hong Kong, China.
Stablecoin is a digital currency pegged to certain stable assets. Due to its small price fluctuations, it is more suitable for daily transactions and payments. So far, the United States, the European Union, the United Kingdom, Japan, and Singapore have all tried to use stablecoins as a means of payment.
As a frontier region of financial innovation in Asia, the Hong Kong SAR government also announced in December 2023 that it plans to enact new laws to implement a licensing system for fiat currency stablecoin issuers, and continues to make progress.
In July 2024, JD CoinChain Technology was selected as one of the first participants in the "Stablecoin Sandbox" announced by the Hong Kong Monetary Authority, and has become one of the companies that the public pays the most attention to.
At this milestone in the development of the industry, Liu Peng, CEO of JD CoinChain Technology, made a professional interpretation of the industry significance of the passage of the "Stablecoin Draft Regulations".
Q: What do you think of the passage of the Regulations? What is the significance of legislation? What are the core contents of the Regulations? As one of the earliest participants in the Hong Kong Stablecoin Issuer Regulatory Sandbox Program, what arrangements will JD.com have for Stablecoin in the next step?
Liu Peng: The third reading of the Stablecoin Bill marks the formal inclusion of stablecoins, a virtual asset, into the legal regulatory system. The Bill provides a good institutional environment for the healthy and sustainable development of Hong Kong's stablecoin market. As Eddie Yue, Chief Executive of the Hong Kong Regulatory Authority, said, "The Bill establishes a risk-based, pragmatic and flexible regulatory system. We believe that a robust and appropriate regulatory environment can create favorable conditions to support the healthy, responsible and sustainable development of Hong Kong's stablecoin and even digital asset ecosystem." This is also a major milestone event for the global cryptocurrency industry.
The Regulations provide a specific regulatory framework, which mainly includes the following aspects: First, strengthen reserve management, emphasizing that licensed issuers need to establish a sound reserve mechanism to ensure that stablecoin reserve assets are of high quality and high liquidity, and that stablecoins can be redeemed in a timely manner at face value; second, attach importance to investor protection. Stablecoin holders have the right to redeem stablecoins from issuers at face value, and this needs to be processed within a reasonable time; third, comprehensive risk management, compliance with anti-money laundering and risk management measures, disclosure obligations, audit requirements and suitability standards for key personnel.
As a participant in the Hong Kong Stablecoin Issuer Sandbox, JD Coin Chain will strictly abide by the contents of the Regulations, actively work with global partners and regulators to implement more scenarios, build an industrial ecosystem, and promote the healthy, compliant and sustainable development of the industry.
Q: In the development of stablecoins in Hong Kong, JD CoinChain Technology has also attracted much attention. Why did you start this business and what are your considerations?
Liu Peng: Under the guidance of JD Group's overseas business development strategy, our team has conducted a relatively detailed study and analysis of the Web3 field and found that issuing payment-type stablecoins through blockchain technology can not only solve the problems encountered in cross-border settlement, but also effectively serve other enterprises and the real economy, and can produce huge economic and social effects for companies and society. At the same time, the Hong Kong government is also vigorously supporting the Web3 industry.
After comprehensive judgment, we initiated the license application in Hong Kong as soon as possible. After about a year of hard work, we are very honored to obtain regulatory recognition and become a participant in the Hong Kong Stablecoin Issuer Sandbox. We are currently actively communicating and cooperating with the Hong Kong Monetary Authority and other regional regulators to promote JD.com's stablecoin business to operate in compliance with global regulations.
Q: In recent years, stablecoins have attracted much attention in Hong Kong, China, the United States and other regions. But for the general public, stablecoins are still a relatively new thing. Can you briefly introduce what stablecoins are? What stage has JD.com's stablecoin progressed to and what is its value?
Liu Peng: In essence, a stablecoin is a cryptocurrency that utilizes distributed ledger or blockchain technology and is pegged to fiat currency or other reserve assets.
Compared with traditional cryptocurrencies, there are significant differences. Although Bitcoin and Ethereum have the ability to store value and circulate among the five functions of currency, these assets cannot achieve what we call a value scale or a means of payment due to their large price fluctuations. Stablecoins make up for these problems in the field of digital currencies. Therefore, they have certain monetary attributes and at the same time have the technical advantages of digital assets. Therefore, stablecoins have quickly emerged in the payment field, and as a payment tool, they are being discussed more and more around the world, and their popularity is getting higher and higher.
JD Stablecoin is a stablecoin based on a public chain and pegged 1:1 to fiat currencies such as the Hong Kong dollar (HKD) or the US dollar (USD). The first phase is tentatively scheduled to issue stablecoins anchored to the Hong Kong dollar and the US dollar, and the specific situation will be adjusted based on supervision and market demand. The positioning of JD Stablecoin is not limited to serving JD's own ecosystem, but is committed to providing more efficient, economical and secure payment infrastructure for global companies and individuals.
Currently, JD Stablecoin has not been officially issued, and has entered the second phase of sandbox testing. We will provide mobile and PC application products for retailers and institutions. The testing scenarios mainly include cross-border payments, investment transactions, retail payments, etc.
Among them, in the cross-border payment scenario, we have the characteristics of fast speed, and the transaction speed is shortened from days to minutes or even seconds; secondly, the cost is low, reducing the intermediate links and transaction fees, which can save cross-border payment costs; the experience is good, and the payment service can be carried out uninterrupted throughout the year. This makes it very suitable for the current international trade settlement application.
In the investment and trading scenario, we are cooperating with the leading compliant exchanges; in the retail payment scenario, we are connecting and testing with the acquiring scenarios such as JD.com Hong Kong and Macau. We also look forward to more high-quality partners joining us to jointly build a stablecoin ecosystem and share the development opportunities of the Web3 industry.
At the same time, we would like to remind the public that JD Stablecoin has not yet been officially issued, and there is no channel to purchase JD Stablecoin. Such information is misleading and fraudulent. The public can search "JD Coin Chain Technology" to obtain the real-time progress of JD Stablecoin.
Q: What measures has JD Stablecoin taken to ensure compliance and security?
Liu Peng: Compliance and security are the basis for the market to accept and recognize JD Stablecoin, and are also one of the advantages of our stablecoin business. We always put safety, compliance and risk control first, and will strictly abide by the Stablecoin Regulations, Anti-Money Laundering Regulations and related regulatory laws and regulations in Hong Kong and other regulatory regions, ensure safety and compliance through the three-line defense mechanism, and establish a three-dimensional risk control system covering on-chain tracking, real-time transaction monitoring, full reserve asset custody, third-party audits, smart contract audits and other measures.