Hong Kong has announced the first group of participants for its stablecoin sandbox, but has warned that it is not yet allowed to raise funds from the public as the region continues its efforts to become a crypto hub.
In a statement late Thursday, the Hong Kong Monetary Authority, the de facto central bank, said it would allow institutions to pilot operational plans for stablecoin issuances “to establish a fit-for-purpose and risk-based regulatory framework.”
Announced by the HKMA in March, the sandbox will first see participation from Jindong Coinlink Technology, RD Innotech, Standard Chartered Bank, Animoca Brands and Hong Kong Telecom.
In a separate statement, Darryl Chan, deputy chief executive of the HKMA, said sandbox participants must not raise funds from the public or offer investment products under the sandbox’s name. “(They) cannot use public funds during the early stages of testing,” Chan said.
According to Chan, use cases proposed by the first group of participants focus on additional applications in payments, supply chain management and capital markets.
“Stablecoins can be used as a means of payment, lowering costs and reducing transaction times, while also leveraging programmability to provide a range of innovative solutions,” Chan added. “Stablecoins can create more automated and ‘smarter’ financial services, facilitating the flow of funds and better managing the risks associated with transactions.”
The announcement of the sandbox participants comes after the authorities released their response to a consultation on Wednesday on a proposal to license stablecoin issuers. A key part of the proposal is to require all fiat-backed stablecoin issuers to obtain a license from the HKMA.
According to the statement, the regulator will finalize the legislation as soon as possible and submit the bill to the legislature.
The Hong Kong Monetary Authority (HKMA) will continue to process sandbox applications and has urged applicants to provide specific plans for the issuance, distribution and redemption of their stablecoins.
“It is important to emphasize, however, that participation in the sandbox is not a prerequisite for applying for a stablecoin issuer license in the future,” Chan said. “Sandbox participants who wish to apply for a license at a later date will still need to submit a formal application once the regulatory framework comes into effect.”
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