Hong Kong’s largest virtual bank, ZA Bank, achieved a new milestone earlier today by an offer Hong Kong has announced plans to offer exclusive Reserve Bank services to stablecoin issuers, a move in line with Hong Kong’s recent regulatory progress regarding cryptocurrencies.
The initiative is part of the region’s new stablecoin licensing regime, which requires stablecoin operators to deposit reserve assets with local banks.
It is worth noting that this rule appears to “enhance the stability” and “security” of cryptocurrencies in the region. It also reflects a general trend that fintech innovations remain intertwined with more traditional financial regulation.
The first issuer of a stablecoin is already active.
According to the report, Yuancoin has become one of the currencies actively participating in its partnership project with ZA Bank, which is on the list of protection projects recently updated by the Hong Kong Monetary Authority (HKMA).
As the first stablecoin issuer to leverage ZA Bank’s recently introduced reserve banking services, the partnership marks a major step towards “promoting innovation and stability” in digital assets.
Yao Wensong, CEO of ZA Bank, announced the importance of these banking services for stablecoin issuers, noting that they blend traditional banking concepts with modern fintech innovations.
He also added that working alongside Yuancoin is another step towards the growth of true innovation and increases the focus on the stability of digital assets. In his words:
The digital bank that provides banking services to stablecoin issuers has successfully combined traditional banking with fintech innovation. The company’s collaboration with the currency symbolizes a shared commitment to fostering innovation and enhancing the stability of digital assets.
Furthermore, the report reveals that ZA Bank has revealed that it is in discussions with about ten other stablecoin issuers.
The bank is also said to have supported the Hong Kong Monetary Authority’s regulatory framework and expects these initiatives to develop well in a controlled testing environment. The report noted:
The company fully supports the policies of the Financial Management Office and is happy to see the relevant development enter the beta testing stage. By providing a safe and reliable banking infrastructure, it will provide more secure protection for users and enhance the confidence of all parties in the stablecoin market.
What is Hong Kong’s Sandbox Initiative?
The Hong Kong Sandbox is an initiative that provides a warm-up exercise for stablecoin issuers before broader regulations become a reality as the government seeks to establish itself as one of the region’s major crypto hubs.
Explaining the initiative, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, recently noted:
The Sandbox arrangement serves as an effective channel for the HKMA and the industry to exchange views on the proposed regulatory regime, and will facilitate the formulation of fit-for-purpose and risk-based regulatory requirements, which is essential to promoting the sustainable and responsible development of the stablecoin issuance business.
Featured image created using DALL-E, chart from TradingView