On May 21, the Hong Kong Legislative Council passed the "Stablecoin Ordinance" (hereinafter referred to as the "Ordinance"). Based on this ordinance, Hong Kong will officially establish a licensing system for stablecoin issuers. This marks another milestone in Hong Kong's promotion of stablecoin issuance.
Stablecoins are digital currencies pegged to certain stable assets. Due to their low price volatility, they are more suitable for daily transactions and payments. As of now, the United States, European Union, United Kingdom, Japan, and Singapore have all attempted to use stablecoins as a payment method.
As a frontier region for financial innovation in Asia, the Hong Kong Special Administrative Region government announced in December 2023 its intention to enact new legislation to implement a licensing system for stablecoin issuers and has been making continuous progress.
JD Chain Technology was selected as one of the first participants in the Hong Kong Monetary Authority's "Stablecoin Sandbox" in July 2024, becoming one of the most closely watched companies.
At this industry development milestone, JD Chain Technology CEO Liu Peng provided a professional interpretation of the industry significance of the passed "Stablecoin Ordinance".
Q: What are your thoughts on the passage of the Ordinance? What is the legislative significance? What are the core regulatory contents of the Ordinance? As an early participant in Hong Kong's stablecoin issuer regulatory sandbox, what are the next steps for JD Stablecoin?
Liu Peng: The third reading passage of the "Stablecoin Ordinance" marks the formal inclusion of stablecoins as virtual assets into the legal regulatory system. The Ordinance provides a good institutional environment for the healthy and sustainable development of Hong Kong's stablecoin market. As HKMA Chief Executive Eddie Yue said, "The ordinance 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 digital asset ecosystem." This is also a major milestone in the global cryptocurrency industry.
The Ordinance provides a specific regulatory framework, mainly including: first, strengthening reserve management, emphasizing that licensed issuers need to establish a robust reserve mechanism to ensure the quality and high liquidity of stablecoin reserve assets, and ensure timely redemption at face value; second, focusing on investor protection, with stablecoin holders having the right to redeem stablecoins from issuers at face value within a reasonable time; third, comprehensive risk management, complying with anti-money laundering and risk management measures, disclosure obligations, audit requirements, and key personnel suitability standards.
As a participant in the Hong Kong Stablecoin Issuer Sandbox, we will strictly adhere to the contents of the Ordinance, actively collaborate with global partners and regulators to implement more scenarios, and build an industry ecosystem to promote healthy, compliant, and sustainable industry development.
Q: JD Chain Technology has also attracted much attention in the development of stablecoins in the Hong Kong region. Why are you undertaking this business, and what considerations do you have?
Liu Peng: Under the guidance of JD Group's overseas business development strategy, our team conducted a detailed research and analysis of the Web3 field. We discovered that issuing payment-type stablecoins through blockchain technology can not only solve cross-border settlement challenges but also effectively serve other enterprises and the real economy, generating significant economic and social effects for both the company and society. Additionally, the Hong Kong government is strongly supporting the Web3 industry.
After comprehensive consideration, we immediately initiated license application work in Hong Kong. Through about a year of effort, we are honored to have received regulatory approval and become a participant in the Hong Kong Stablecoin Issuer Sandbox. Currently, we are actively communicating and collaborating with the Hong Kong Monetary Authority and regulators from other regions to promote the compliant global development of JD Stablecoin.
Q: In recent years, stablecoins have been of great interest in Hong Kong and other regions like the United States. However, for the general public, stablecoins are still relatively new. Could you briefly introduce what stablecoins are? What stage has JD Stablecoin reached, and what is its value?
Liu Peng: Essentially, stablecoins are cryptocurrencies that use distributed ledger or blockchain technology and are pegged to legal tender or other reserve assets.
Compared to traditional cryptocurrencies, there are significant differences. While Bitcoin and Ethereum possess the ability to store value and serve as a means of circulation among the five monetary functions, these assets experience large price fluctuations, making them unable to serve as a value measure or payment method. Stablecoins fill these gaps in the digital currency field, thus possessing certain monetary attributes while also leveraging the technical advantages of digital assets. Consequently, stablecoins have quickly emerged in the payment domain, with increasing global discussion and popularity as a payment tool.
JD Stablecoin is a stablecoin based on a public chain and pegged 1:1 to legal currencies such as Hong Kong dollars (HKD) or US dollars (USD). The first phase is tentatively set to issue stablecoins anchored to Hong Kong dollars and US dollars, with specific details adjusted based on regulatory and market demands. JD Stablecoin's positioning is not limited to serving JD's own ecosystem but is committed to providing more efficient, economical, and secure payment infrastructure for global enterprises and individuals.
Currently, JD Stablecoin has not been officially launched and has entered the second stage of sandbox testing. We will provide mobile and PC application products for retail and institutional users. Test scenarios primarily include cross-border payments, investment trading, and retail payments.
In cross-border payment scenarios, we have the advantages of speed (reducing transaction time from days to minutes or even seconds), low costs (reducing intermediary steps and transaction fees), and good experience (providing uninterrupted payment services). These characteristics make it highly suitable for current international trade settlement applications.
In investment trading scenarios, we are collaborating with top compliant exchanges; in retail payment scenarios, we are connecting and testing with platforms like JD Hong Kong and Macau Station. We look forward to more quality partners joining to build the stablecoin ecosystem and share Web3 industry development opportunities.
We also want to remind the public that JD Stablecoin has not been officially launched and is not currently available for purchase. Any such information is misleading and fraudulent. The public can search for "JD Chain Technology" to obtain real-time progress of JD Stablecoin.
Q: What measures has JD Stablecoin taken to ensure compliance and safety?
Liu Peng: Compliance and safety are the foundation for market acceptance of JD Stablecoin and one of our advantages in stablecoin business. We always prioritize safety, compliance, and risk management, strictly adhering to Hong Kong and other regulatory regions' stablecoin ordinances, anti-money laundering regulations, and related regulatory laws. We have established a three-line defense mechanism to ensure safety and compliance, creating a comprehensive risk control system that includes on-chain tracking, real-time transaction monitoring, full reserve asset custody, third-party audits, and smart contract audits.
