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British bank Standard Chartered (NASDAQ: SCBFF) and Hong Kong-based metaverse firm Animoca Brands are among the first participants of the city’s stablecoin sandbox.
The Hong Kong Monetary Authority (HKMA) announced the sandbox in March. The initiative aims to offer interested stablecoin issuers a platform to test the issuance process, business models, risk management systems, and more “under manageable conditions.”
HKMA recently shared the first batch of participants, which also includes leading Chinese online retailer JD.com (NASDAQ: JD), RD InnoTech and Hong Kong Telecommunications Limited. The five will leverage the institutional custody solutions of Zodia Custody, which Standard Chartered partly owns.
“As a global Web3 ecosystem builder based in Hong Kong, we are excited about the mass adoption of digital assets via stablecoins issued under the HKMA’s proposed stablecoin issuer regime, and we are delighted to explore opportunities and new ways to innovate through the Sandbox,” commented Animoca Brands President Evan Auyang.
HKMA, the city state’s de facto central bank, says the five demonstrated genuine interest and ability to develop, issue, and manage a stablecoin.
The regulator clarified that the five are not to solicit funding from the public or offer any products developed in the sandbox. It pledged to make a public announcement when it finally allows the companies to target the public.
In a separate announcement, HKMA’s Deputy CEO Darryl Chan doubled down on this warning, saying: “The HKMA will make separate announcement in case sandbox participants are allowed to handle the general public’s funds within a limited scope as a result of adjustments to the testing scope. Non-compliance will lead to immediate termination of sandbox participation.”
Some of the regulatory requirements that participants must observe include highly liquid reserve assets, seamless redemption, robust wallet and private key management, and AML and CFT measures.
The proposed use cases for the current batch of participants revolve around payments, capital markets, and supply chain management. While Hong Kong’s financial systems are among the most advanced globally, HKMA believes stablecoins can boost efficiency, improve user experience, and lower transaction costs.
Stablecoins have been a key focus for Hong Kong. Last November, HKMA launched a public consultation on the best regulatory approach. Last week, the watchdog announced that it would publish the results of this consultation soon and use them to inform legislative developments.
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