Jeremy Allaire: Stablecoin Regulation Vital In Hong Kong

Jeremy Allaire, co-founder and CEO of Circle, the operator behind the USDC stablecoin, expressed his optimism regarding Web3 development in Hong Kong and highlighted the significance of stablecoin regulations. In an interview with the South China Morning Post, Allaire acknowledged that mainland China may not be opening its markets to cryptocurrencies, but he stressed the importance of Hong Kong embracing digital assets to remain relevant in the global financial landscape.

Stablecoins’ Role in RMB Expansion

While there have been statements from government officials in mainland China expressing support for Hong Kong’s efforts to attract the crypto industry, there is no indication that Beijing itself is warming up to cryptocurrencies. Allaire recognized this fact but pointed out that stablecoins, which are crypto assets pegged to fiat currency, could offer an immediate solution to China’s goal of internationalizing the yuan.

Allaire cited stablecoins pegged to the offshore yuan (CNH) as an example of how they could facilitate the broader use of the RMB in global trade and commerce. He mentioned the detained team members of CNH Coin, a stablecoin project pegged to the Hong Kong dollar, in May, although the authorities have not provided an explanation for their detention.

Hong Kong aims to regulate stablecoins as part of its strategy to become a global virtual asset hub. The Hong Kong Monetary Authority (HKMA) has committed to introducing stablecoin regulations by 2024, recognizing the potential impact of such products on financial markets. The Securities and Futures Commission is also working on complementary regulations for stablecoins, following the recent implementation of rules for licensing sellers of other cryptocurrencies.


HKMA Prioritizes Stablecoin Regulations

Circle’s USDC, the second-largest USD-backed stablecoin globally after Tether (USDT), is considered a “stored-value instrument” in the United States. Allaire expressed his enthusiasm for the HKMA’s plans, emphasizing that it is a priority for the Hong Kong government and a motivating factor for Circle to expand its business in the region. Concerns about stablecoins’ impact on financial stability have been raised by central banks worldwide. The HKMA addressed this issue in its conclusion paper, stating that the value of reserve assets should always match the value of outstanding stablecoins.

In addition to stablecoin regulations, the HKMA has been exploring the possibility of a digital Hong Kong dollar. The city is already part of a cross-border trial for the central bank digital currency (CBDC) eCNY, utilizing a blockchain known as the mBridge, with Thailand and the United Arab Emirates also participating in the trial. Allaire acknowledged the role of CBDCs as complementary to stablecoins, stating that while central banks upgrade their systems, private sector innovation on the public internet remains valuable.