Jeremy Allaire, the co-founder and CEO of Circle, operator of the USDC stablecoin, has expressed optimism about the development of Web3 in Hong Kong and the local monetary authority’s (HKMA) efforts to regulate stablecoins.
While acknowledging that mainland China is unlikely to open its markets to cryptocurrencies, Allaire believes that stablecoins could play a role in the internationalization of the yuan. Allaire stated in an interview with the South China Morning Post, “If eventually the Chinese government wants to see the RMB used more freely in trade and commerce around the world, it may be that stablecoins are the path to do that more than the central bank digital currency.”
Allaire highlighted the potential of stablecoins pegged to fiat currencies, specifically mentioning a stablecoin pegged to the offshore yuan (CNH). He emphasized that stablecoins could offer a more immediate solution for the Chinese government’s goal of internationalizing the yuan compared to a central bank digital currency (CBDC).
While some government officials in mainland China have shown support for Hong Kong’s efforts in the cryptocurrency industry, there is no indication that Beijing itself is warming up to crypto.
Circle in Favor of HK Regulations, HK Engaged in Cross-Border Trials
Hong Kong is positioning itself as a global virtual asset hub and is focusing on regulating stablecoins. The HKMA has committed to introducing regulations for stablecoins by 2024, recognizing their potential impact on financial markets.
The Securities and Futures Commission is also working on complementary regulations for stablecoins. Circle’s USDC, the second-largest US dollar-backed stablecoin after Tether (USDT), is considered a regulated stablecoin issuer, and the company is encouraged by the HKMA’s prioritization of stablecoin regulations.
While central banks worldwide have expressed concerns about stablecoins’ impact on financial stability, the HKMA has proposed that the value of reserve assets should always match the value of outstanding stablecoins as a mitigating measure. The HKMA is also researching the possibility of a digital Hong Kong dollar and is participating in a cross-border trial of the eCNY using blockchain technology.
Allaire believes that central bank digital currencies (CBDCs) and private stablecoins can coexist in a well-regulated environment. He sees CBDCs as a means for central banks to upgrade their systems but believes that private sector innovation on the public internet is distinct and valuable. Circle has a significant presence in Asia, with approximately 125 employees in the region, making it their largest non-US market.
“We’re excited that this is a priority for the Hong Kong government and it seems like it’s a real priority for the HKMA,” Allaire added. “That’s tremendously positive and is really motivating for us to want to be able to grow our business here.”
The regulatory initiatives and focus on stablecoins in Hong Kong align with Circle’s business goals, and the company is motivated to grow its presence in the region. Allaire’s positive outlook on stablecoins and the regulatory environment in Hong Kong demonstrates the potential for continued development and adoption of digital assets in the global financial landscape.