U Card Project: Hong Kong or the Best Starting Choice

In recent years, the U Card project has attracted widespread attention from practitioners in the fields of payments, wallets, and crypto products. This product allows users to convert stablecoins such as USDT or USDC into Hong Kong dollars or US dollars and make POS purchases, bind to electronic wallets, or withdraw cash from ATMs using physical or virtual cards.

For entrepreneurs looking to start a U-card project from scratch, Hong Kong may be the ideal starting point. This is not only due to Hong Kong's relatively clear regulatory environment but also because it has practical feasibility and a complete ecosystem support.

Advantages of Hong Kong

1. Clear regulatory boundaries: Foreign exchange businesses require a Money Services Operator (MSO) license, the stored value function falls under the regulation of Stored Value Facilities (SVF), and currently, stablecoin custody does not require an additional license.

2. Simplified management of crypto assets: Crypto assets can be managed through custodial service providers without the need to apply for special licenses.

3. Rich cooperation resources: There are numerous local BIN partners, MSO service providers, KYC service providers, and payment clearing network resources.

4. Flexible operational space: Through clever structural design (such as instant authorization and custodial wallets), projects can gain development opportunities in regulatory gray areas.

Core Partners

A compliant and feasible U-card project requires the following five core partners:

1. Issuing Institution (BIN Sponsor)
2. Payment Processor
3. Custodian of Crypto Assets
4. KYC/AML service provider
5. Fiat Currency Exchange Service Provider

Related Licenses

The U Card project mainly involves two types of licenses:

1. Money Service Operator (MSO) license: Used to legalize currency exchange functions.
2. Stored Value Facility (SVF) License: Currently, most U-card projects avoid this licensing requirement through specific structural design.

Current Status of SVF License

Currently, most U Card projects choose not to apply for the SVF license, mainly for the following reasons:

• High threshold: Requires a large amount of paid-in capital and strict technical review.
• Small project scale: The number of users has not reached a level that attracts regulatory attention.
• Regulatory wait-and-see attitude: Regulatory agencies may view these products as observable innovative models.
• Ingenious compliance design: The project avoids creating platform balances through instant settlement and other methods.

The Necessity of MSO License

Although from a legal perspective, certain business models may not mandatorily require an MSO license, in actual operations, this license is almost indispensable:

• Bank account opening requires
• Requirements for Clearing Agency Cooperation
• Compliance certification recognized by investors

In addition, the upcoming MSO system for virtual assets in Hong Kong will further regulate this field.

Stablecoin Exchange Process

The U Card project usually completes the exchange of USDT/USDC to fiat currency through local over-the-counter (OTC) service providers. The specific process is as follows:

1. Users deposit stablecoins to the platform's custody wallet
2. The project party or the clearing party will transfer the assets to OTC.
3. OTC transfers fiat currency into the project's MSO or payment clearing account.
4. Fiat currency ultimately flows to the user or merchant account.

This method has advantages such as flexibility, speed, and avoiding exchange scrutiny.

Other Low-Threshold Regional Options

Aside from Hong Kong, regions such as Singapore, the UAE, and Lithuania also offer varying degrees of development opportunities for the U Card project, each with its own advantages and disadvantages. Overall, Hong Kong remains the preferred location due to its ease of establishment, high acceptance by banks, and relatively lenient regulatory environment.

Conclusion

The U Card represents the integration of crypto assets with traditional payment systems. Entrepreneurs can promote the adoption of crypto payments on a compliant basis through clear structural design and a robust development path. This is not only an innovation but also an important step in closely tying the crypto economy to everyday life.