Hong Kong law enforcement authorities have arrested employees from Trust Reserve, the payment company responsible for the CNHC and HKDC stablecoins tied to the Hong Kong dollar and RMB. A notification displayed on the company’s office door confirmed the judicial seizure on May 29, 2023. The nature of the charges leading to the arrests remains undisclosed.
Trust Reserve, known for its cross-border payment business, employs stablecoins—digital currencies whose value is tethered to traditional fiat currencies—but has not heavily publicized these.
Notable examples of stablecoins are Circle’s USDC and Tether’s USDT, both linked to the US dollar’s value. Recently, Trust Reserve secured $10 million in a funding round spearheaded by KuCoin Investments, Circle, and IDG Capital. This followed their relocation of headquarters from the Cayman Islands to Hong Kong.
The specifics surrounding the arrests remain murky. It’s speculated that Chinese authorities are reinforcing control over digital transactions, particularly those not utilizing its e-CNY central bank digital currency. The e-CNY has reportedly amassed 260 million wallets and expanded its footprint across 25 cities.
China maintains a firm ban on crypto trading and mining activities. Some analysts believe these recent arrests may signal the state’s intent to decrease reliance on the US dollar for cross-border transactions, shifting instead towards the RMB. This shift is evidenced by the interest expressed by nations like Saudi Arabia, Bangladesh, and India in utilizing the digital yuan for trading purposes.
Post-2008 financial crisis, China fortified its cross-border payments infrastructure with bilateral currency swap agreements and the Cross-Border Interbank Payment System. Recently, a broadcast on Chinese Central Television hinted at a potential change in China’s stance on cryptocurrency, prompting speculation about the lifting of its crypto ban. However, the broadcast was subsequently removed without further clarification or updates.
