How PayMe’s 3.3 million users and Hong Kong firms could start using stablecoins

For Hong Kong’s 3.3 million PayMe users, everyday transactions such as buying coffee or splitting bills with friends could soon involve stablecoins, with HSBC preparing to introduce the digital currency in the second half of this year.That comes after HSBC Holdings, together with a Standard Chartered-led joint venture, became the first to obtain a stablecoin issuer licence from the Hong Kong Monetary Authority on Friday, marking a breakthrough in the city’s digital finance development.HSBC, the biggest lender in Europe and Hong Kong, is looking to introduce stablecoins to its more than 7 million customers in the city by integrating them into its popular PayMe app and its Hong Kong mobile banking apps.Anchorpoint Financial, a joint venture among Standard Chartered, local game software and venture capital firm Animoca Brands, and Hong Kong Telecommunications, will initially focus on institutional investors but may consider retail usage later.This means stablecoins in Hong Kong will not be confined to tech-savvy users but could become part of everyday transactions. Here is what you need to know about stablecoins, which are set to be rolled out in Hong Kong.What is a stablecoin?Stablecoins are a type of cryptocurrency pegged to a specific reserve asset, such as the Hong Kong dollar, US dollar or any fiat currency. Initially, both HSBC and Standard Chartered plan to issue only a Hong Kong dollar-pegged stablecoin.HSBC’s stablecoin offering is aimed at the general public and designed to be simple. Eugene LeeThe global market value of stablecoins is about US$315 billion, with annual transaction volumes of up to US$35 trillion, according to industry data. They can be used for domestic and cross-border payments, remittances, and settlement of tokenised assets and other digital trading.Who can use stablecoins? Do they need an application or new account?HSBC’s stablecoin offering is aimed at the general public and designed to be simple. Its 7 million Hong Kong customers and 3.3 million PayMe users will not need to apply separately, but will only need to activate the in-app stablecoin wallet.PayMe users can top up their wallet with cash balances, linked bank accounts, or credit cards at a ratio of one stablecoin to HK$1. HSBC mobile app users can buy or sell stablecoins using funds from savings or current accounts and deposit them into the wallet.Further ReadingBoth apps will allow transfers and payments at shops and restaurants, while the HSBC mobile app will also enable trading of tokenised products and other digital assets.Anchorpoint’s Hong Kong Dollar At Par (HKDAP) stablecoin, also pegged 1:1 to the local currency, could launch as early as the second quarter for institutional investors such as brokers, e-wallets and asset managers to settle investment products. Retail use may follow later.HSBC Asia and Middle East co-CEO Surendra Rosha. Photo: Jonathan WongWhy use stablecoins if they do not pay interest?“Stablecoin is not a deposit. It works by holding digital money instead of cash. For digital money, such as the money you put in PayMe, you are putting digital money in a digital wallet,” said Surendra Rosha, co-CEO for Asia and the Middle East at HSBC.“You don’t earn interest on the cash that you hold in your digital wallet. As such, stablecoin is not competing with deposits.”The benefit, Rosha said, was giving users another way to hold money and make payments for tokenised assets such as deposits, bonds or gold.“We can use tokenisation technology to fractionalise assets. You don’t need to pay a large sum of money to buy the gold, but the tokenised gold allows you to start with a smaller sum and invest,” Rosha said. “It makes investment easier for people, less cumbersome.”HSBC Hong Kong CEO Maggie Ng said that although stablecoins did not earn interest, merchants were expected to offer rewards to encourage payments in stablecoins, as they sped up settlement and reduced costs for shops or restaurants.Will stablecoins be used overseas or in other currencies?Both lenders said they would consider issuing other stablecoin currencies in future.HSBC said it may launch another currency-pegged stablecoin next year. Rosha said the bank would first focus on domestic use before expanding overseas. Standard Chartered is more keen to develop cross-border capital and payment flows, allowing settlements to be quicker, cheaper and processed outside banking hours.