IDA Finance taps Chainlink to enhance transparency for fiat-backed HKDA stablecoin

IDA Finance has collaborated with the decentralised oracle network Chainlink to enhance transparency and cross-chain interoperability of its upcoming HKDA stablecoin.

According to an October 9 press release, IDA Finance and Chainlink are collaborating to integrate the latter’s Proof-of-Reserves (PoR) and Cross-Chain Interoperability Protocol (CCIP) technologies with the stablecoin issuer’s HKDA stablecoin that will be pegged 1:1 with the Hong Kong dollar.

Chainlink’s PoR is a decentralized and automated auditing mechanism that ensures on-chain assets—such as stablecoins, wrapped tokens, or other real-world assets—are sufficiently backed by off-chain reserves.

The process leverages Chainlik’s distributed Oracle network to pull data from trusted sources and custodians and continuously monitor them.

As a result, HKDA users will be able to verify the stablecoin’s collateral in real time, thereby fostering greater trust and transparency in the asset. 

This helps reduce the risks of insufficient reserves, potential insolvency, and loss of confidence in the stablecoin’s value, especially in light of past incidents like the TerraUSD crash, which heightened fears about stablecoin reliability in the market.

Another key benefit of IDA’s collaboration with Chainlink is the integration of the Oracle provider’s CCIP protocol.

The CCIP protocol is an open-source standard that allows different blockchains to communicate and exchange assets.

This will allow HKDA to be deployed across various chains, thereby increasing its accessibility.

Commenting on the development, Angie Walker, Global Head of Banking and Capital Markets at Chainlink Labs said, the project’s goal is to “support the development of tokenized real-world assets,” beyond just helping boost the adoption of HKDA.

The announcement further adds that IDA is already working with leading financial institutions, banks, exchanges, and real-world asset issuers to position HKDA as a secure payment vehicle and trading instrument in the digital asset markets.

The collaboration follows a September seed funding round where IDA raised $6 million from prominent investors like CMCC Global and Hack VC to advance the development of HKDA. 

HKDA aims to serve as a settlement currency for cross-border commerce and transactions, bridging Hong Kong with the global market and streamlining international trade.

Hong Kong to regulate stablecoins

Hong Kong’s financial regulator presented the results of a two-month public consultation paper on a proposal to introduce a regulatory regime for stablecoin issuers earlier this year.

The paper received feedback from 108 entities, with the majority of the respondents agreeing that a regulatory framework for stablecoins is necessary.

A draft of the proposed regulation is expected to be presented by the end of 2024.

If approved, stablecoin issuers like IDA would be required to get a license.

During the same month, regulators also announced that Za Bank, the largest virtual bank in Hong Kong would be one of the entities allowed to hold reserve assets for stablecoin issuers.

Meanwhile, a stablecoin issuer sandbox is currently underway with participants like Standard Chartered Bank, Animoca Brands, and Hong Kong Telecommunications.

These companies are currently testing various use cases for stablecoins in a risk-controlled environment.

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