Chinese regulators are reportedly preparing to restrict mainland state-owned enterprises and banks from pursuing stablecoin and crypto initiatives in Hong Kong.
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Chinese internet giants, state-owned enterprises and financial institutions operating in Hong Kong may face restrictions on stablecoin and crypto activities.
According to a Thursday by local news outlet Caixin, mainland Chinese firms operating in may be forced to withdraw from cryptocurrency-related activities. The Hong Kong branches of several state-owned enterprises and Chinese banks are also expected not to participate in the race to obtain a Hong Kong stablecoin license.
The news follows reports that HSBC and the Industrial and Commercial Bank of China (ICBC), the world’s largest bank by total assets, . Hong Kong’s new stablecoin regulatory framework came into effect on Aug. 1 with a . Regulators said 77 institutions had expressed interest in applying.
According to Caixin, recent policy shifts mean that Chinese banks and other institutions applying for a Hong Kong stablecoin license will likely withdraw from the race. An anonymous senior financial industry insider reportedly told the outlet that those players may postpone their applications for stablecoin licenses.
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Fears of risk transfer
A source familiar with the matter told Caixin, “Hong Kong’s stablecoin business is just beginning, and its future direction is unclear,” and that it was important “not to rush into participation.”
Major Chinese institutions had shown interest before the policy shift. In August, a China Merchants Bank subsidiary .
China-based e-commerce giant JD.com also reportedly just days ahead of Hong Kong’s new stablecoin regime becoming effective. Similarly, Ant International and Singapore in early June.
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Hong Kong wants to simplify crypto for banks
The report follows another Caixin article suggesting the Hong Kong Monetary Authority (HKMA) may ease capital requirements for banks handling crypto.
to a Thursday Caixin report, the HKMA is reportedly considering easing capital rules for banks holding crypto by lowering bank capital requirements.
The report stated that Hong Kong authorities intend to optimize crypto asset capital regulations to help banks accept compliant stablecoins and promote investments in digital assets based on .
Cointelegraph reached out to the HKMA for comment but did not receive a response.
China’s cautious approach to stablecoins
According to Caixin, restrictions will also be placed on investments by those companies in crypto and crypto exchanges. The stance of the Chinese government toward stablecoins is also not new.
In early August, Chinese authorities reportedly instructed local firms to , citing concerns that stablecoins could be exploited as a tool for fraudulent activities.
Still, China appears to be giving stablecoins careful consideration. According to late August reports, for the first time to promote global use of its currency.
The report followed the Shanghai State-owned Assets Supervision and Administration Commission’s meeting to , showing some warm-up to the idea.
In late July, Chinese blockchain meant for circulation in “Belt and Road” countries and explicitly barred from use in mainland China.
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