Hong Kong moves towards stablecoin licenses as Shenzhen warns of stablecoin scams
The Chinese autonomous territory of Hong Kong is moving closer towards the issuance of stablecoin licenses, while 30 kilometers away on the Chinese mainland, the authorities in Shenzhen are warning against stablecoin investment scams.
Hong Kong has set Aug. 1 as the effective date for its incoming Stablecoin Ordinance. Firms such as JD.com and Ant Group, an affiliate company of Alibaba Group, are understood to be interested in seeking licensing.
Single-digit license issuance
In a recent interview with Chinese language newspaper Ming Pao, Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, outlined that stablecoin licenses are likely to be issued in 2025 following the passing of the Aug. 1 effective date, although he indicated that the number of licenses issued will remain in single digits.
Hui hopes that stablecoins can address some of “the difficulties and pain points in the real economy,” like cross-border payments involving volatile local currencies. The official said that stablecoins can reduce transaction costs and facilitate cross-border transactions when based on fiat currencies and serving as effective payment tools.
Yuan-based stablecoins
Hui stated that the issuance of a stablecoin in Hong Kong which is based on the sovereign currency of another jurisdiction would only be permitted following “discussions with the relevant authorities." It’s understood that the aforementioned Chinese e-commerce firms have been lobbying government for the approval of offshore yuan-based stablecoins.
Last month, the Governor of the People’s Bank of China, Pan Gongsheng, acknowledged that stablecoins are disrupting global payments infrastructure. However, mainland China still has a mining and trading ban in place in relation to crypto, despite previous speculation that the country would open up to crypto.
Hui expressed the view that where a stablecoin implicates another sovereign currency, there are additional risk factors that would have to be taken into account.
Exploiting uninformed view of stablecoins
Meanwhile, 30 kilometers from Hong Kong, the authorities in Shenzhen have issued a warning to members of the public highlighting that scammers are exploiting the public’s uninformed view of stablecoins as a guise through which to lure victims into investment scams.
They asserted that scammers are using new concepts, in this case stablecoins, for hype in an effort to peddle illegal fundraising, gambling, fraud and money laundering schemes.
The Shenzhen Municipal Task Force Office for Preventing and Combating Illegal Financial Activities asked the public to report such schemes “engaged in illegal fundraising in the name of investing in stablecoins,” in order to enable the authorities to crack down on the illicit activity. The authorities added:
"We urge the general public to remain rational in their investment decisions, avoid blindly trusting extravagant promises, develop a correct understanding of money and investment, stay alert to financial risks and avoid falling victim to scams."
Last month, JD.com took to Weibo to warn the public that fraudulent JD stablecoins were being offered by scammers at a time when the company has yet to issue a stablecoin.
