Stock prices of Bank of China surge following whispers about potential licensing of stablecoins

Bank of China Prepares to Enter Stablecoin Market in Hong Kong

In a significant move, the Bank of China's Hong Kong unit is set to apply for a stablecoin issuer license, following in the footsteps of the Industrial and Commercial Bank of China (ICBC) and Bank of China (BOC) Hong Kong, who submitted applications earlier this year.

This move comes as part of a broader strategy by JD founder Richard Liu to leverage stablecoins to reduce cross-border payment costs, initially for business-to-business transfers and later for consumers. The appeal of stablecoins, according to Vincent Chok, CEO of First Digital, lies in their efficiency, as they reduce settlement times and bypass traditional intermediary fees.

The Hong Kong Monetary Authority (HKMA) requires issuers to secure approval for stablecoin licensing, and the city introduced its stablecoin licensing regime on August 1. The licensing framework imposes strict requirements on reserve management, redemption guarantees, client fund segregation, anti-money laundering, disclosure, and operator vetting.

However, the Bank of China did not respond to a request for comment regarding the stablecoin issuer license application. The Securities and Futures Commission (SFC) and the HKMA have urged investors to exercise caution and have warned that market swings tied to licensing rumours may be misleading.

The SFC and HKMA have also emphasised the need to stay vigilant in these situations due to the significant uncertainties surrounding the outcomes of these preliminary plans or applications. Major financial institutions, including Standard Chartered, have shown interest in Hong Kong's stablecoin licensing regime.

Chok added that adoption is accelerating as regulation provides clarity, suggesting exponential growth in the next 2-5 years. He also mentioned that the opportunity is "especially pronounced in emerging markets, where growing stablecoin adoption provides users a hedge against currency volatility."

The rules in Hong Kong's stablecoin licensing framework came shortly after the U.S. passed the GENIUS Act. JD.com and Ant Financial have announced plans to seek licenses abroad for services targeting their international businesses.

Interestingly, these market movements are said to follow corporate announcements, news reports, social media posts, or speculations regarding plans to apply for licenses. On Monday, the Bank of China's Hong Kong-listed shares rose by 6.7%. The Bank of China mentioned researching digital asset applications and their risk management during its last week's results call.

As the stablecoin market continues to evolve, it will be interesting to see how the Bank of China's entry into the market will impact the industry and the broader financial landscape in Hong Kong and beyond.

Stock prices of Bank of China surge following whispers about potential licensing of stablecoins