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(Kitco News) - The turnaround in blockchain acceptance in Hong Kong is attracting some of the largest and most prominent firms in the industry, including Circle, the issuer of the USD Coin (USDC) stablecoin, the second-largest stablecoin by market capitalization behind Tether (USDT).
“Hong Kong clearly is looking to establish itself as a very significant center for digital assets markets and for stablecoins and we are paying very close attention to that,” Circle founder Jeremy Allaire said in an interview with Bloomberg Television on Tuesday on the sidelines of the World Economic Forum in Tianjin, China.
Engagement with the Hong Kong market has become a priority for many firms ever since the Special Administrative Region of the People's Republic of China adopted new rules on June 1 that, among other changes, enabled the retail trading of cryptocurrencies by residents in the region.
Allaire noted that Asia is now “a huge area of focus” for cryptocurrency companies as the large populations and eagerness to integrate the latest technologies make the region ideal for blockchain and Web3 growth.
The developments in Hong Kong have also stoked optimism that China could start to soften its stance and lift its ban on cryptocurrencies sooner rather than later. “What’s happening in Hong Kong may be a proxy for ultimately how these markets grow in Greater China,” Allaire said.
These comments from Allaire come after Circle received a Major Payments Institution license in Singapore, which allows the firm to offer digital payment token services as well as domestic and cross-border money transfer services in the city-state.
“We’ve seen an enormous demand for digital dollars in emerging markets, and Asia is really central to that,” he said. “We are seeing very steady progress, obviously the Singapore regulators have been at the forefront of thinking about this.”
Allaire said the Singapore license will help Circle to distribute its USD Coin “more fully in the region.” He added that while Circle sees multiple markets advancing in parallel – including Singapore, Hong Kong, Tokyo, France, Britain, the United Arab Emirates and the U.S. – each market serves different dimensions of the economic system and no single market will dominate at the expense of others.
“All around the world, in every major market, stablecoin laws are coming into place, and what I think that signifies is that this kind of digital currency, these fiat-linked digital currencies, are about to become a part of the mainstream global financial system,” he said.
When asked if he thought that regulators and central banks were beginning to “come to grips” with the eventual integration of stablecoins and digital currencies into the global financial system, Allaire said, “They are.”
“The lesson here is that private-sector innovation in digital currency with fiat is happening much faster than public-sector innovation in that space,” he continued. “Central banks know this is happening, this is a new area of private sector innovation in the financial system, and they need to regulate that.”
“The focus is on the markets moving forward,” he added. “They need to make sure that there are good rules around it, and I think it's very encouraging for the commercial growth of the sector.”
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As for what can help ensure the approval and integration of stablecoins into the global payment system, Allaire said, “The really key thing is a full-reserve model.”
“The assets can be a mixture of overnight cash at central banks, short-duration Treasury bills or equivalent government debt,” he said. “If you have that foundation as the asset base, and that’s regulated and looked after by banking supervisors, you’ll actually have the safest fiat digital instruments in the world. So we are pushing for that, and that is increasingly, I think, what we are going to see around the world.”
When asked about the U.S. Securities and Exchange Commission (SEC) specifically, Allaire said that at the global level, a uniform view is emerging that payment stablecoins are the domain of credentialed supervisors, banking and payment supervisors, and that also “seems to be the focus of the United States.”
“There could be stablecoins that behave in different ways, which might be subject to securities or commodities regulations, but clearly, these payment tokens that are operating as payment systems, it's clear they are not going to be subject to SEC regulations,” he concluded.
