Hong Kong’s Stablecoins Ordinance marks a significant milestone, as cross-border payments using the cryptocurrency can facilitate trade-finance flows between Hong Kong, mainland China and global markets such as the Middle East, according to the CEO of Zand, an AI-powered fintech and financial-services group in the United Arab Emirates (UAE).
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Future development under the ordinance could help Hong Kong rebuild its role in expediting trade and exports between mainland China and global markets, said Michael Chan.
“The city’s traditional re-export role for mainland China has been diminishing as direct trade through mainland ports grows,” said the Hong Kong-born graduate of City University of Hong Kong. “But its role as the middleman in the digital trade-finance segment could be revitalised.”
“A stablecoin is more time and cost effective [than traditional currency], as a reliable corridor with greater transparency, plus programmability features, such as automation of conditional payments and escrow, integrated compliance checks and real-time [foreign exchange] rates.”
Chan joined Zand as CEO in November 2022 and led the bank to break even in just 22 months. Zand also became one of the youngest banks to achieve an investment-grade rating from Fitch Ratings, a BBB+. The bank has also obtained in-principle approval from the central bank of the UAE to offer a dirham stablecoin.
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Hong Kong rolled out the Stablecoins Ordinance on August 1, setting a global standard in the cryptocurrency sector as it kick-started the application process for potential issuers in line with a broader effort to be a leading digital asset hub connected to China’s vast economy. The ordinance aims to ensure a prudent approach for the issuance of stablecoins, a type of cryptocurrency backed by fiat currencies or other reserve assets.
Some players have described the regime’s upfront capital requirement of HK$25 million (US$3.2 million) as a barrier for smaller firms.