Author: Jessy, Jinse Finance
On July 18, the Hong Kong Monetary Authority announced the first batch of companies entering the stablecoin sandbox: JD CoinChain Technology (Hong Kong) Co., Ltd.; Yuanbi Innovation Technology Co., Ltd. (hereinafter referred to as Yuanbi Technology); and Standard Chartered Bank (Hong Kong) Limited, Anmi Group Limited, and Hong Kong Telecommunications (HKT) Limited.
Among the three companies, Yuanbi Technology currently has two major businesses: "Yuanbi Wallet" that supports digital legal currency payments and "Hong Kong dollar stablecoin". Its team has rich experience in traditional finance and mainland background. It was founded by former Hong Kong Monetary Authority President Norman Chan and serves as chairman of the board of directors. The other six directors are ZhongAn Online Chairman Ou Yaping, ZhongAn International President Xu Wei, HashKey Group Chairman Xiao Feng, Dragonfly Capital Managing Partner Feng Bo, Boqi Environmental Protection Non-Executive Director Zheng Tuo and Yu Fanyun.
When Yuanbi Technology was first established, its vision was to support cross-border payments for enterprises. This payment tool was previously legal tender, but with the development of Web3, stablecoins are increasingly used in cross-border payments. The launch of the Hong Kong dollar stablecoin is not only an initiative of the Hong Kong government, but also a move that is in line with Yuanbi Technology's business development plan and interests.
Jinse Finance interviewed Rita Liu, CEO of Circle Coin. In the interview, Rita Liu introduced in detail the actual use cases of the Hong Kong dollar stablecoin planned by Circle Coin, the development progress of the Hong Kong dollar stablecoin, and the issues that the Hong Kong government is most concerned about in the Hong Kong dollar stablecoin.
Whether it is a company or a government, launching a stablecoin is a move to keep up with the global financial development trend. In the view of Yuanbi Technology, the Hong Kong dollar stablecoin will not compete with the US dollar stablecoin for the market in the future, but will work with various stablecoins to broaden the application scenarios of stablecoins and expand the overall market in the process of connecting Web2 and Web3.
The following is the interview transcript:
Jinse Finance: When did Yuanbi Technology apply to enter the sandbox? What is the reason for Yuanbi Technology to enter the sandbox this time? In your opinion, what are the factors that the HKMA considers when reviewing companies entering the sandbox?
Rita Liu: After the HKMA announced in March that sandbox applications were available, we submitted our application immediately. In fact, before March, we had already made a lot of preparations for the Hong Kong dollar stablecoin business.
108 institutions have responded to the HKMA's consultation, which shows that the Hong Kong dollar stablecoin is very popular, but we don't know how many institutions have formally submitted applications. Yuanbi Technology is fortunate to be one of the three institutions approved for the first time, which shows that Yuanbi Technology's understanding of the stablecoin business and its response strategies, risk control, and technical capabilities have been recognized by the HKMA.
Yuanbi Technology has certainly met the requirements of the HKMA regarding systems, technology, risk control, and business capabilities. In addition, the HKMA also values whether a company has a strategy to succeed in the Hong Kong dollar stablecoin, rather than just applying for a license for the sake of applying for a license.
Jinse Finance: Can you briefly introduce Yuanbi Technology’s business?
Rita Liu: Yuanbi Technology currently has two major businesses, one is the Hong Kong dollar stablecoin, and the other is the Yuanbi wallet. From the beginning, we hope to help Hong Kong consolidate its position as a financial center. At present, our vision is to link Web2 and Web3. At present, Web3 needs to keep its vitality and bring in the real economy.
Yuanbi Wallet provides users with a multi-currency fiat currency account, while the Hong Kong dollar stablecoin actually uses blockchain to achieve cross-border payments. The two can actually be well linked and integrated to achieve our vision.
Jinse Finance: What are the main application scenarios of the Hong Kong dollar stablecoin launched by Yuanbi Technology?
Rita Liu: The first scenario is the coin-to-coin transaction itself. With the compliance of global exchanges, compliant stablecoins have a large market in compliant exchanges.
The second scenario is cross-border payment and cross-border trade. Hong Kong itself is a traditional trade center, and a large amount of global trade is currently settled in stablecoins. This is because stablecoin settlement is faster and more convenient than traditional payment channels, especially in some financially underdeveloped regions, where traditional payment channels are slow and opaque. Therefore, stablecoins themselves have great potential in cross-border payments and clearing, and Yuanbi Technology hopes to expand in this area.
The third market is for tokenized assets, where compliant stablecoins play an intermediary role. Currently, there are many discussions and attempts on tokenization of traditional assets around the world and in Hong Kong, and there are many opportunities.
In order to build an ecosystem for the three scenarios, Yuanbi Technology has made a lot of preparations. Many compliant exchanges around the world are interested in our stablecoin project, and we are also negotiating cooperation intentions with many payment companies.
Jinse Finance: Can the current business of Yuanbi Wallet be a good bridge with the Hong Kong dollar stablecoin? Can a deposit and withdrawal channel from fiat currency to Hong Kong dollar stablecoin be opened on Yuanbi Wallet?
Rita Liu: Yuanbi Wallet has obtained a stored-value payment license, similar to the license obtained by Octopus and Alipay in Hong Kong. We are the only licensed institution that does To B business. Yuanbi Wallet's business is to open accounts for global companies remotely electronically based in Hong Kong and help them make cross-border payments. There are currently eight fiat currencies in the wallet. Some small and medium-sized enterprises that have difficulty opening accounts are the main customers of Yuanbi Wallet.
Stablecoins and Yuanbi wallets actually have a high degree of overlap in terms of customers and cross-border payment application scenarios. The current wallet customer base can be easily converted into a stablecoin customer base in the future. This is a major advantage of Yuanbi Technology as a stablecoin issuer.
The deposit and withdrawal of fiat currency to Hong Kong dollar stablecoin is actually another business, which may require us to cooperate with compliant exchanges or obtain a compliant OTC license. We need to pay attention to the progress of regulations in this area before making a decision.
Jinse Finance: What progress is expected for the Hong Kong dollar stablecoin this year?
Rita Liu: Currently, the three companies that have been announced to enter the sandbox can start trial operations under the guidance of the Monetary Authority of Singapore.
We will soon be able to implement some business scenarios while balancing risks and business development. Although it is in the testing phase, real stablecoins will be issued during this phase.
In the summary of the consultation opinions issued two days ago, it can be seen that the HKMA is also making a lot of preparations for the legislation of the Hong Kong dollar stablecoin, but the Legislative Council has a certain process. ( Jinse Finance Note: Chen Weimin, deputy director of the Hong Kong Monetary Authority, issued a statement on July 18 that the authorities are implementing a regulatory system for stablecoin issuers in Hong Kong, and are fully promoting the drafting of the law, striving to submit the relevant draft bill to the Legislative Council for deliberation before the end of the year.)
Jinse Finance: When communicating with the HKMA, what did you find they were most concerned about in terms of the Hong Kong dollar stablecoin? What were their concerns?
Rita Liu: The HKMA focuses on the balance between risk control and business expansion.
The background of the institutions' work on the Hong Kong dollar stablecoin is what Hong Kong said in its declaration released at the end of 2020, that it would become the global center of Web3. The development in the past two years has been somewhat circuitous, but overall, many laws and regulations have been implemented, and there are many companies that have developed in compliance. I think the regulators are very eager to create a good environment for everyone to develop Web3.
At present, the lack of supervision will hinder the development of the industry. The supervision hopes that everyone will develop their business in compliance with the regulations. For the companies selected for the sandbox, the supervision is not only looking at their risk control capabilities, such as not causing any threats to the security of the financial system, but also whether they have corresponding implementation strategies.
The actual implementation of the Hong Kong dollar stablecoin requires a certain amount of time for regulators and the market to understand each other. We need to communicate more with regulators. In addition, blockchain itself has many advantages, such as its transparency and traceability, which are advantages in combating crime and anti-money laundering, which is also what regulators are optimistic about.
Jinse Finance: The US dollar stablecoin has already occupied a very high market share in the crypto world. How can the Hong Kong dollar stablecoin compete with it? What specific plans does the Yuancoin have to seize market share?
Rita Liu: I think the Hong Kong dollar stablecoin is not in competition with the existing stablecoins. The pie can be made bigger. The total market value of stablecoins now exceeds 160 billion US dollars. Although it looks big, it is still small compared with the traditional payment market and financial market.
Many peers are calling for the launch of various fiat stablecoins. For example, if we can put the exchange market on the chain, we can increase the settlement speed, reduce friction, and reduce dependence on the traditional fiat currency system. The launch of various fiat stablecoins can form an on-chain exchange market.
Some stablecoin issuers in the industry have a consensus that within five years, the market is likely to reach 3 trillion US dollars. Stablecoins can bring more traditional financial market volume into Web3. If Yuanbi Technology can bridge Web2 and Web3 well, it will expand a huge market.
Jinse Finance: What is the difference between digital Hong Kong dollar and Hong Kong dollar stablecoin?
Rita Liu: Digital Hong Kong dollar is what we often call central bank digital currency. It is carried on a relatively centralized chain and is a wholesale digital currency for financial activities of financial institutions in various countries. The Hong Kong dollar stablecoin is carried on a decentralized chain and corresponds to private financial activities. The two scenarios coexist because they serve different customer groups.
Jinse Finance: What does the launch of the Hong Kong dollar stablecoin bring to the Hong Kong dollar and Hong Kong?
Rita Liu: Based in Hong Kong, we are making the Hong Kong dollar stablecoin. The Hong Kong dollar stablecoin has achieved certain success in the Web3 world. It is a bridge that can push the Hong Kong dollar and even Hong Kong to stand at the forefront of the development of the Web3 era.
We often say that we need to care about the financial needs and concepts of the younger generation. How do they view wealth, how do they view money, and how do they invest? What role will the Hong Kong dollar and Hong Kong play in the Web3 era? How can Hong Kong consolidate its position as a financial center? The Hong Kong dollar stablecoin undoubtedly plays an important role in answering these questions.
