Chinese internet giants, state-owned enterprises and financial institutions operating in Hong Kong may face restrictions on stablecoin and crypto activities.
According to a Thursday report by local news outlet Caixin, mainland Chinese firms operating in Hong Kong may be forced to withdraw from cryptocurrency-related activities. The Hong Kong branches of several state-owned enterprises and Chinese banks are also expected not to participate in the race to obtain a Hong Kong stablecoin license.
The news follows reports that HSBC and the Industrial and Commercial Bank of China (ICBC), the world’s largest bank by total assets, plan to apply for stablecoin licenses in Hong Kong. Hong Kong’s new stablecoin regulatory framework came into effect on Aug. 1 with a six-month transition period. Regulators said 77 institutions had expressed interest in applying.
According to Caixin, recent policy shifts mean that Chinese banks and other institutions applying for a Hong Kong stablecoin license will likely withdraw from the race. An anonymous senior financial industry insider reportedly told the outlet that those players may postpone their applications for stablecoin licenses.
Hong Kong Monetary Authority. Source: WikimediaRelated: Jack Ma-linked Yunfeng Financial acquires $44M of ETH amid Web3 push
Fears of risk transfer
A source familiar with the matter told Caixin, “Hong Kong’s stablecoin business is just beginning, and its future direction is unclear,” and that it was important “not to rush into participation.”
Major Chinese institutions had shown interest before the policy shift. In August, a China Merchants Bank subsidiary launched a Hong Kong-based institutional crypto exchange.
China-based e-commerce giant JD.com also reportedly registered entities tied to a potential stablecoin rollout just days ahead of Hong Kong’s new stablecoin regime becoming effective. Similarly, Ant International reportedly registered entities tied to stablecoin rollouts in Hong Kong and Singapore in early June.
Related: HashKey launches $500M digital asset treasury fund in Hong Kong
Hong Kong wants to simplify crypto for banks
The report follows another Caixin article suggesting the Hong Kong Monetary Authority (HKMA) may ease capital requirements for banks handling crypto.
According to a Thursday Caixin report, the HKMA is reportedly considering easing capital rules for banks holding crypto by lowering bank capital requirements.
Source: Whale InsiderThe report stated that Hong Kong authorities intend to optimize crypto asset capital regulations to help banks accept compliant stablecoins and promote investments in digital assets based on public, or permissionless, blockchains.
Cointelegraph reached out to the HKMA for comment but did not receive a response.
China’s cautious approach to stablecoins
According to Caixin, restrictions will also be placed on investments by those companies in crypto and crypto exchanges. The stance of the Chinese government toward stablecoins is also not new.
In early August, Chinese authorities reportedly instructed local firms to cease publishing research and holding seminars related to stablecoins, citing concerns that stablecoins could be exploited as a tool for fraudulent activities.
Still, China appears to be giving stablecoins careful consideration. According to late August reports, Chinese authorities may authorize yuan-backed stablecoins for the first time to promote global use of its currency.
The report followed the Shanghai State-owned Assets Supervision and Administration Commission’s meeting to discuss strategic responses to stablecoins and digital currencies, showing some warm-up to the idea.
In late July, Chinese blockchain Conflux introduced a new stablecoin backed by offshore Chinese yuan meant for circulation in “Belt and Road” countries and explicitly barred from use in mainland China.
Magazine: Stablecoins in Japan and China, India mulls crypto tax changes: Asia Express
Source: https://cointelegraph.com/news/china-restricts-hong-kong-stablecoin-activity?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
