ZA Bank backs Hong Kong’s stablecoin plan with reserve bank services

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Hong Kong’s largest digital lender, ZA Bank, has announced plans to support the city-state’s stablecoin plans by providing reserve bank services for digital asset issuers.

In an official announcement, the digital bank disclosed that the move to provide the services to stablecoin issuers is the first of its kind in Hong Kong and is designed to integrate traditional banking services with financial technology innovation.

ZA Bank’s exclusive services will allow issuers to hold accounts to store their reserves backing the stablecoin in line with new standards unveiled by Hong Kong’s regulators. Furthermore, the bank appears willing to undertake settlement services involving stablecoins while hinting at the provision of liquidity facilities.

Using its advanced security architecture, ZA Bank says it will ensure the safety of reserves in its holding, adhering to the highest standards prescribed by existing regulations.

Lured by ZA Bank’s slew of benefits, Yuancoin has become the first stablecoin issuer to use the digital bank for its reserve bank services. It has since received the green light from the Hong Kong Monetary Authority (HKMA) to roll out its offerings after participating in a sandbox by the banking regulator.

ZA Bank CEO Yao Wensong described the partnership with Yuancoin as one that will offer a series of benefits for the local digital asset ecosystem, allowing it to compete with other jurisdictions. Wensong argues that a robust stablecoin ecosystem will provide new use cases for cross-border trade while improving the state of local payment.

“Stablecoin use cases are very diverse, be it wholesale or retail markets, tokenization, settlement for exchange trading, or to tackle overseas remittance pain points,” read a statement. “We are keen to explore how to put them into real-world use with potential issuers.”

Meanwhile, the CEO has confirmed that talks are underway with at least 10 stablecoin issuers seeking to use ZA Bank for their exclusive reserve bank services. The digital bank has been making significant plays in Hong Kong’s Web3 space, facilitating over $1 billion worth of digital asset transactions since the start of the year.

The bank holds nearly 80% of the virtual asset trading platform (VATPs) market share, which puts it significantly ahead of its closest competitors.

A new stablecoin regime

After months of regulatory horsetrading, Hong Kong has unveiled a new stablecoin licensing regime for intending issuers. The regime, a collaboration between the Financial Services and the Treasury Bureau (FSTB), seeks to create a uniform framework for the operation of service providers to protect investors from black swan events.

Firms are expected to meet the minimum capital requirements, ensure compliance with Know Your Customer (KYC) and anti-money laundering (AML) rules, and commit to regular audits by supervisory bodies.

“We believe that a well-regulated environment is conducive to the sustainable and responsible development of the stablecoin ecosystem in Hong Kong,” said HKMA CEO Eddie Yue.

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