(Yicai) July 8 – More than 40 companies are gearing up to apply for Hong Kong's stablecoin licenses, which will start to be issued next month, but only a handful are likely to be approved due to the high technical and regulatory requirements, industry insiders told Yicai.

Hong Kong's Stablecoin Bill, which will take effect on Aug. 1, introduces a licensing system for companies which issue stablecoins that are tied to fiat currencies as part of a broader effort to regulate virtual assets in the special administrative region.

"In addition to the over 40 companies already preparing to apply, law firms have reported that dozens more are interested. This could turn out to be a very competitive process,” said Alex Zuo, senior vice president of digital wallet platform Cobo and head of its payment business.

Applicants are mostly major Chinese financial institutions and internet giants. A lot of the smaller players do not meet the requirements to apply.

The bar is quite high as the business of stablecoins involves interdisciplinary crossovers between finance, technology and crypto, so applicants need in-depth knowledge of all three areas, Zuo said.

Both tech firms and traditional financial companies are lining up for the stablecoin license. JD Coin Chain, Circle Innovation and a consortium of UK lender Standard Chartered, Hong Kong game publisher Animoca Brands and Hong Kong telecoms carrier HKT have already announced their intention to apply. Other companies such as Chinese fintech firms Ant International and Ant Digital Technology have also said they are interested.

Meanwhile some large Chinese companies involved in supply chains are actively hiring blockchain specialists to prepare their applications.

There are mainly two types of companies that are interested in stablecoins, Zou said. One group is made up of firms that focus on cross-border payments. They might not want to issue stablecoins themselves, but they have clients who demand stablecoin or digital currency services. So they need a cheap, efficient way to convert between fiat and digital currencies. The other group, which includes big internet firms, intends to issue and circulate stablecoins.

While stablecoins could have a significant impact on the current international monetary system, claims that they will overhaul or disrupt the existing set-up are overblown, Qiao Yide, vice president and secretary-general of the Shanghai Development Research Foundation, told Yicai.

Stablecoins can expand the use of fiat currencies and improve the convenience and efficiency of cross-border payments, Qiao said. However, the actual efficiency gains may not be as great as expected.

Editors: Tang Shihua, Kim Taylor