By
Bena Ilyas
April 12th, 2024
US dollar-pegged stablecoins have an undeniable dominance of the stablecoin market. This has raised concerns among industry players who feel that an HKD stablecoin may not be necessary after all.
Chinese layer 1 blockchain project Conflux Network has tapped fintech firm AnchorX to float a Hong Kong dollar-backed stablecoin. According to a report, the AxHKD stablecoin is projected to launch by the second quarter of this year.
Confirming the timeframe of the launch, Conflux CEO Fan Long said that Q2 is the shortest possible time period when users can begin to have access to the stablecoin on exchanges. However, he also added that the speed will depend on “how fast the regulatory sandbox is pushing forward.”
Earlier this month, Conflux announced that it was facilitating the beta-testing of AxHKD. According to the X post, the stablecoin is designed to maintain a 1:1 peg to the Hong Kong Dollar (HKD). Part of the announcement reads:
“AxHKD on Conflux guarantees a secure 1:1 peg to the HKD with high-quality reserves and regulated custodianship by OKLink Trust.”
Conflux Looks to Regulators
As earlier mentioned, the achievement of the joint stablecoin venture by Conflux and AnchorX may be tied to the current regulatory outlook in Hong Kong. Recall that last week, the Hong Kong Monetary Authority (HKMA) launched a regulatory sandbox for stablecoin issuers. At the time of launch, the apex central bank claimed that it aims to use the sandbox to supervise stablecoin issuers in the region. This, it hopes to achieve, by giving out guidelines expected of such firms as Conflux looking to issue fiat-pegged stablecoins.
It might be worth noting that the sandbox launch was a result of a previous consultation effort by authorities. Last December, the HKMA alongside the Financial Services and the Treasury Bureau jointly launched a consultation, proposing that all fiat-pegged stablecoin issuers obtain a license from the HKMA. The consultation was concluded on February 29 amid plans of launching its own CBDC.
AxHKD Stablecoin: What Does the Market Demand Look Like?
Currently, US dollar-pegged stablecoins have an undeniable dominance of the stablecoin market. This has raised concerns among industry players who feel that an HKD stablecoin may not be necessary after all.
For instance, Alessio Quaglini, chief executive officer and co-founder of Hong Kong-based crypto custodian Hex Trust believes that an HKD-pegged stablecoin may be good for discussion but not necessarily for any commercial value. He said partly:
“It’s good to be part of the discussion and to be part of the proof of concept [and] the sandbox, but in terms of real commercial opportunity, I think it’s quite limited.”
Contrary to such opinions, however, some individuals have high hopes that there will be good demand.
Vincent Chok, chief executive officer of First Digital, the issuer of FDUSD stablecoin, believes it is a very young market. Therefore, there is a lot of room for growth.
Chok’s view coincides with Long’s who also believes that demand for stablecoin is not even up for questioning. According to Long, the crypto trading ban on the mainland makes certain of it.