Stablecoins inspire hope, and hype, in HK

City to launch crypto licensing system

- HOLMES CHAN KATIE FORSTER

Stablecoin excitement has gripped Hong Kong as the city prepares to launch a licensing system for the less volatile type of cryptocurrency, but authorities warn against overplaying its future role in financial systems.

The digital units have been touted as acheaper, easier way to carry out monetary transactions, and their popularity is soaring, with more than US$270 billion in circulation worldwide.

Unlike the heady highs and lows of bitcoin, the value of most stablecoins is kept steady by being linked to an existing national currency — mainly the dollar — or a commodity like gold.

Stablecoins are useful internationally because they enable fast, low-cost cross-border payments, handy in markets where hard currency is limited, such as Argentina and Nigeria.

The tokens, bought and sold on digital exchanges, are also used as a safe way for crypto investors to station their profits, instead of converting to cash.

“The size of the stablecoin market has reached a level where the cash flows have geopolitical implications,” said Paul Brody, global blockchain leader at consulting firm EY.

More than 99% of stablecoin assets are in US dollars, so for other countries “if you're not a player, you could find yourself frozen out” Mr Brody told AFP.