HKMA chief: Stablecoins could become interface between traditional finance and crypto

Eddie Yue, chief executive of the Hong Kong Monetary Authority, said today that the cryptocurrency market is still “far from maturity” and will likely continue to evolve. 

“With that, stablecoins could become the interface between traditional finance and the virtual asset market,” Yue said in a statement. “In a scenario where stablecoins become one of the preferred payment options by the general public, we should reasonably expect further integration between the digital payment ecosystem and the real economy, and whether the stablecoin is indeed ‘stable’ will then become ever more important.”

Yue’s comments come as the HKMA — the city’s de facto central bank — and the Financial Services and the Treasury Bureau jointly published today a consultation paper in the hope of gaining more powers to regulate the issuers of “fiat-referenced stablecoins.”

The Hong Kong government appears to have identified the growth potential of cryptocurrency. “The clear growth potential of virtual assets as an innovative technology has mostly been overshadowed by their price volatility, notably its rapid growth during the Covid-19 pandemic and subsequent collapse after a series of market events since early 2022, which hampered market confidence,” Yue said.

Exploring the use of a CBDC

“In Hong Kong, there are multiple mediums of exchange that have been used extensively over time and proven effective, such as traditional bank deposits and stored value facilities,” Yue continued. “The HKMA and the banking industry have also been actively exploring the potential use cases of central bank digital currency and tokenised deposits.” 

“An obvious question would be, with all these options, is there really a need for yet another alternative? We believe the answer lies in the hands of the end users who would ultimately decide which options work best for them,” he added.

Unlike its neighboring Chinese mainland’s broader crackdown on cryptocurrency trading and mining, Hong Kong has rolled out the welcome mat for crypto firms this year — even going so far as encouraging banks to work with them. In June, Hong Kong officially started its crypto licensing regime for virtual asset trading platforms, allowing licensed exchanges to offer retail trading services.

Last week, the HKMA and the Securities and Futures Commission said in a joint circular that they’re prepared to start accepting applications for spot crypto exchange-traded funds (ETFs). Some industry leaders have said that Hong Kong could be one of the earliest front-runners in Asia to allow spot bitcoin ETFs if the U.S. approves such ETFs.