U Card Project: Hong Kong may be the best starting point

In recent years, more and more enterprises have begun to pay attention to the emerging direction of U cards. Essentially, U cards are a service that converts cryptocurrencies such as USDT/USDC into fiat currency and allows payments through physical or virtual cards, binding electronic wallets, and even ATM withdrawals. For entrepreneurs intending to enter this field, choosing the right starting location is crucial. After in-depth analysis, Hong Kong seems to be an ideal choice.

Advantages of Hong Kong

The reason why Hong Kong has become the preferred location for the U Card project is mainly based on the following points:

1. The regulatory environment is relatively clear: Hong Kong has clear regulatory boundaries for foreign exchange, stored value, and other businesses.
2. Well-developed infrastructure: There are abundant BIN partners, MSO service providers, KYC providers, and payment clearing network resources locally.
3. Flexible operational space: Project parties can obtain a certain operational space within the compliance framework through clever structural design.

Core Partners of the U Card Project

To successfully operate the U Card project in Hong Kong, at least the following five types of core partners are needed:

1. Issuing Institution (BIN Sponsor)
2. Payment Settlement Network
3. Custodial Wallet Service Provider
4. KYC/AML service provider
5. Fiat Currency Settlement Channels

Relevant License Considerations

The U Card business mainly involves two types of licenses:

1. Money Service Operator License (MSO): Used to legalize the currency exchange function.
2. Stored Value Facility (SVF) License: Currently, most U-Card projects circumvent this license requirement through specific structural designs.

In fact, most U-card projects choose not to apply for an SVF license, but emphasize that their services do not constitute stored value instruments, operating solely under an MSO license. The reasons for the existence of this practice include:

• The threshold for SVF license application is high, and the costs are significant.
• The current U Card project is relatively small in scale and has not yet attracted significant regulatory attention.
• The project design is clever, avoiding the definition of a stored value tool.

However, it is worth noting that once the U card business experiences explosive growth, the regulatory attitude may change.

The Necessity of MSO License

Although certain U card business models may not strictly require an MSO license from a legal perspective, in actual operations, the MSO license is almost indispensable:

• Opening a bank account requires
• Clearing Institution Cooperation Requirements
• Investor confidence assurance

In addition, Hong Kong's upcoming virtual asset MSO system will further regulate cryptocurrency exchange business.

U Card Fund Settlement Process

The fund settlement process for the U Card project usually follows the steps below:

1. Users deposit cryptocurrency into the platform's custodial wallet.
2. The project party or the clearing house will transfer the cryptocurrency to the local over-the-counter (OTC) trader.
3. OTC will transfer the equivalent fiat currency to the account designated by the project party.
4. When users use the U-card for consumption or withdrawal, fiat currency flows to the end user or merchant.

This model has advantages such as flexibility, speed, and avoidance of additional compliance interpretations.

Other Optional Regions

Apart from Hong Kong, places like Singapore, Dubai, and Lithuania also offer varying degrees of development opportunities for the U Card project. However, considering all factors comprehensively, Hong Kong remains the most ideal starting point.

Conclusion

The U Card is not just a new type of payment tool, but also represents the integration of crypto assets with the traditional financial system. For entrepreneurs aspiring to this field, choosing the right starting point is crucial. Hong Kong, with its unique advantages, provides a relatively ideal development environment for the U Card project. However, regardless of where one chooses to start, ensuring the compliance and sustainability of the project should always be the primary considerations.