Hong Kong Limits Stablecoin Licenses Amid Growing Interest

Hong Kong's authorities are adopting a cautious approach towards the issuance of stablecoin licenses, despite a surge in interest from various banks and companies. With over 77 firms vying for approval, the Hong Kong Monetary Authority has made it known that only a limited number of licenses will be granted, emphasizing stringent requirements for potential applicants.

Key Takeaways

Hong Kong plans to issue only a few stablecoin licenses despite growing interest.
More than 77 firms, including major banks, are seeking approval.
Strict licensing criteria will be enforced, with only one approval expected in the first batch next year.
Concerns over increased fraud risks are prompting cautious regulatory measures.
Interested firms must submit applications by September 30, but approvals may not occur until next year.

Hong Kong to issue ‘only a few' stablecoin licenses as local interest intensifies - 1

Rising Interest in Stablecoins

Hong Kong is seeing a significant increase in stablecoin interest. Recent reports indicate that over 77 companies are keen on obtaining stablecoin licenses. However, the Hong Kong Monetary Authority (HKMA) has stated that it will only authorize a select few.

Major Banks in the Mix

The Hong Kong branch of the Industrial and Commercial Bank of China (ICBC) has recently joined the list of applicants, becoming the second major bank to seek stablecoin licensure, following the Hong Kong Bank of China. Other prominent names in the stablecoin race include Standard Chartered and PetroChina, highlighting the demand among large firms.

Strict Approval Criteria

Legislators have emphasized that just because the demand is high does not mean all applicants will be approved. Only those companies that adhere to strict benchmarks will be considered. “The number of licenses to be issued will be very small,” remarked a member of the Legislative Council, indicating that potentially only one company may secure a license in the initial round of approvals next year.

Exclusive Vetting Process

Earlier reports suggested that regulators might adopt an invite-only licensing model, relying on a selective vetting process for prospective issuers. This cautious approach is part of broader efforts to manage the influx of firms competing to launch stablecoins, ensuring effective oversight and reducing potential risks.

Growing Fraud Concerns

In light of rising fraud risks since the stablecoin law's implementation on August 1, the Securities and Futures Commission (SFC) and HKMA have warned about increasing digital asset crime. Authorities reported receiving 265 complaints related to fraud and other digital asset offenses in the first half of the year, with stablecoin-related activities flagged as a major concern. These factors have further reinforced the cautious licensing approach, as regulators aim to protect Hong Kong’s financial reputation.

Application Deadline Approaches

Prospective applicants are facing a tight deadline. The HKMA has called on all interested firms to submit their complete applications by September 30 for consideration. However, final approvals are not expected until at least next year.