Hong Kong’s central bank has denied issuing any license for a stablecoin pegged to the offshore yuan in the city, refuting a flurry of media reports on an upcoming token.
The Hong Kong Monetary Authority (HKMA) warned investors against getting roped into stablecoin projects that claim to have received a stablecoin license in the city. In a statement posted on WeChat, the watchdog noted that it had yet to issue any license under its Stablecoin Ordinance, which took effect on August 1. Any token promoted as regulated by the HKMA is illegal under Hong Kong laws, it added.
The warning comes just days after AnchorX, a fintech firm based in the city, announced that it was set to issue the first stablecoin pegged to the offshore yuan. Known as AxCNH, it targets cross-border payments between offshore Chinese companies and their trading partners along the Belt and Road regions.
HKMA becomes the latest regulator in the city to warn against rising digital currency fraud risk following the implementation of the Stablecoin Ordinance. A month ago, the Securities and Futures Commission (SFC) cautioned against a rise in companies jumping on the stablecoin bandwagon to lure investors without any concrete products.
SFC CEO Julia Leung urged investors to watch out for projects that tout “misleading prospects of gains from short-term price volatility and be wary of unsubstantiated claims, particularly those appearing on social media.”
Hong Kong’s cautious optimism
When Hong Kong introduced the Stablecoin Ordinance, industry experts anticipated a surge in stablecoin issuers in the city, competing for dominance in the emerging Asian stablecoin market.
However, the HKMA was quick to temper expectations of a sharp surge in issuance licenses. Two months ago, HKMA chief executive Eddie Yue stated that the central bank would only issue a handful of licenses, and that “a large number of applicants will be disappointed.”
The Stablecoin Ordinance has also imposed onerous capital, liquidity, and AML requirements on issuers, frustrating many small players who claim the compliance costs are too high. Industry sources say that these firms, which initially expressed interest in the license, are now waiting for industry giants like Alibaba-affiliated (NASDAQ: BABA) Ant Group and e-commerce giant JD.com (NASDAQ: JD) to complete the entire process before they apply.
Certik’s Esme Pau noted that the city’s strict requirements have become a hurdle for interested applicants, most of whom can’t meet the capital requirements.
“Such obligations create a challenging calculus: obtaining a license under the existing regime may limit near-term profitability, which explains fading market enthusiasm,” he stated.
In mainland China, the central bank has launched a new operations center in Shanghai, focusing on cross-border payments and blockchain services as part of its CBDC project.
The new center will target the internationalization of the digital yuan, the People’s Bank of China (PBoC) announced in a statement, as reported by local media outlets. Despite being the most advanced central bank digital currency (CBDC) by a major economy, the digital yuan’s use remains confined within China.
“[The center] contributes to enhancing China’s influence in the global financial system and provides an open, inclusive and innovative Chinese solution for improving the global cross-border payment system,” commented Tian Xuan, a professor at Tsinghua University’s National Institute of Financial Research.
The center launched three new platforms targeting blockchain services, cross-border digital payments, and digital assets.
Earlier, PBoC Deputy Governor Lu Lei stated that the top bank had already developed a cross-border payments system powered by the digital yuan. China is also working on joint cross-border payment systems with BRICS members, as well as a regional solution with Thailand and the UAE under mBridge.
According to Zhaopeng Xing, a senior expert on China at Australia’s ANZ Bank, the new center suggests that China wants to focus on the CBDC within its borders but on a yuan-pegged stablecoin for offshore transactions.
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