The Hong Kong General Chamber of Commerce (HKGCC) has applied to create a stablecoin pegged to the yuan (CNY). The application, which has provoked great interest in the financial sector, is part of a set of strategies to promote the yuan’s intentions of securitization.

Similarly, the application also aims to encourage the adoption of the Digital Asset Connect Scheme that could trade close to 20 billion Hong Kong dollars (HKD), just over 2 billion US dollars. Through this initiative, Hong Kong, which wants to promote the adoption of the yuan to make trade transactions much more accessible, seeks to strengthen its position as a global financial center.

The proposal is part of the budget package and necessary measures recently adopted by the HKGCC for 2024-2025.

In addition to seeking to boost the adoption of this new stablecoin by both financial institutions and banks in Hong Kong, the proposal also wants them to be part of the Digital Asset Connection Scheme. This scheme is a series of digital platforms that can interact with banks and digital assets. With this initiative, the HKGCC also aims to encompass business investments, financial products and services, bonds, and loans. All of this would be operating under a joint and integrated regulatory framework.

China Backs Hong Kong’s Stablecoin Project for Economic Integration 

According to the General Chamber of Hong Kong, the proposal has been approved by the Chinese government, under the leadership of President Xi Jinping. China has also created a model that allows the investment and operation of Chinese assets from the Special Administrative Region. This account model is known as the HKD-RMB Dual Counter Model.

This strategy makes it clear that implementing a stablecoin linked to China’s currency could strengthen economic ties on the part of both Hong Kong and China, as it offers new options for both investment and trade. The proposal adds to the growing interest worldwide in stablecoins backed by national currencies. Similar initiatives in other countries seek to encourage the adoption of local currencies and, in turn, improve the efficiency of transactions internationally.

Hong Kong has been analysing the regulation of stablecoins in recent months; for example, in December of the previous year, the Hong Kong Monetary Authority, Financial Services, and the Treasury Bureau issued a general consultation paper on proposals on the possibility of having a regulatory regime for cryptocurrencies.