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HONG Kong’s ZA Bank is talking to potential stablecoin issuers about setting up accounts for the cash reserves that would back the tokens.
Alternate chief executive Devon Sin said the virtual lender is in touch with five to eight existing and new corporate clients that are considering creating stablecoins. They would be offered fiat reserve accounts once they are officially admitted to a Hong Kong Monetary Authority (HKMA) regulatory sandbox, he said.
“Stablecoin use cases are very diverse, be it in wholesale or retail markets, tokenization, settlement for exchange trading, or to tackle overseas remittance pain points,” Sin said. “We are keen to explore how to put them into real-world use with the potential issuers.”
Hong Kong is trying to develop a digital asset hub to help restore its lustre as a financial centre. The city last year licensed its first crypto trading platforms under a fresh rulebook and is open to listing spot digital-asset exchange-traded funds. The HKMA is crafting a framework for stablecoins, which are usually pegged 1-1 to fiat currency and typically backed by reserves of cash and bonds.
Starting last month, the HKMA began accepting applications to test stablecoin issuance in trials. Projects had yet to commence as at Apr 3. Sin said that ZA Bank will consider custodying virtual assets, including stablecoins, and will explore the requisite infrastructure needs.
Ever since ZA Bank made a high-profile pitch to the Web3 sector, in which participants had complained about a dearth of banking services, the bank has handled more than US$1 billion in transfers from over 100 Web3 clients, he said. Web3 refers to a vision of the Internet built around crypto and blockchains.
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The eight virtual banks licensed in Hong Kong are loss-making as at 2022, based on their annual reports. ZA Bank plans to break even this year, Sin added. BLOOMBERG
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