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Conflux aims for Q2 launch of HKD-pegged stablecoin with AnchorX

Conflux Network, a Layer 1 blockchain project based in China, is working with fintech firm AnchorX to launch a Hong Kong dollar-backed stablecoin as soon as the second quarter of this year.

Fan Long, founder and chief executive of Conflux, told The Block in an interview that the AnchorX team is hoping to launch its “AxHKD” stablecoin as soon as possible.

“We hope they could push it as soon as possible,” Long said. “If it’s going fast, maybe in Q2, people will be able to get them from exchanges — that’s the fastest possibility. But a lot of things are determined by how fast the regulatory sandbox is pushing forward.”

Earlier this month, Conflux and AnchorX announced the beta-testing of AxHKD, designed to maintain a 1:1 peg with the Hong Kong dollar, “backed by high-quality liquid asset reserves.”

The AxHKD, set to be launched initially on the Conflux public blockchain, will have OKLink Trust as its custodian for the stablecoin issuance, according to a company’s statement.

The pair’s plan comes as the Hong Kong Monetary Authority, the de facto central bank, launched a regulatory sandbox for stablecoin issuers last week. The HKMA said the sandbox could help the government deliver supervisory expectations to industry players interested in issuing fiat-referenced stablecoins in Hong Kong.

The sandbox launch comes after the authorities concluded a consultation on Feb. 29 on regulating stablecoin issuers. In December, the HKMA and the Financial Services and the Treasury Bureau jointly launched a consultation and proposed that all fiat-referenced stablecoin issuers should obtain a license from the HKMA.

Market demand

With U.S. dollar-pegged stablecoins dominating the stablecoin market, some industry players have raised questions about market demand for an HKD stablecoin.

“For Hong Kong dollar [pegged stablecoins], honestly I don't even think there's any need for a stablecoin in Hong Kong dollars,” Alessio Quaglini, chief executive officer and co-founder of Hong Kong-based crypto custodian Hex Trust, said. “I don't think there's space for more than one provider, if any.”

Quaglini continued that it’s good to have a HKD-pegged stablecoin in the market. “It's good to be part of the discussion and to be part of the proof of concept [and] the sandbox,” he added. “But in terms of real commercial opportunity, I think it's quite limited.”

However, Vincent Chok, chief executive officer of First Digital, the issuer of FDUSD stablecoin, has expressed optimism towards market demand. “We see there's a very good demand. It is still a very, very small market — lots of room to grow for not only us — but I think there are a lot of new stablecoins that will be coming on the market fairly soon,” Chok told The Block. 

“We know that there are a lot of people that are lining up to apply for this Hong Kong stablecoin licensing as well,” Chok said, adding that the firm plans to participate in the sandbox as it is getting ready to issue a Hong Kong dollar-denominated stablecoin in the hope of launching it later this year.

“There's definitely going to be demand,” said Long of Conflux. Long noted that with a crypto trading ban on the mainland, “Hong Kong becomes a kind of magnet attracting all sorts of trading needs that are not satisfied.”

Long noted that the Hong Kong government’s support for the crypto industry also “put additional guarantees on the future of any stablecoin denominated in HKD.”