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As the crypto space sees a rise in popularity and global adoption, Hong Kong is making waves with its forward-thinking approach. The city-state is not just embracing the digital currency revolution, but it’s also aiming to become a significant player. According to Wu Blockchain, Hong Kong received a proposal to issue its own stablecoin, a move that could see it compete with established giants like Tether (USDT) and USD Coin (USDC).
HKDG Stablecoin Aims To Strengthen Hong Kong’s Blockchain Plans
A fresh policy recommendation is urging the government of Hong Kong to introduce its own stablecoin, named HKDG, which would be supported by its foreign exchange reserves. This move is aimed at rivaling existing stablecoins like USDT and USDC.
The proposal is a collaborative effort between Wang Yang, the Vice Chancellor of the Hong Kong University of Science and Technology and Chief Scientific Advisor of the Hong Kong web3 Association, angel investor Cai Wensheng, BlockCity founder Lei Zhibin, and Ph.D. student Wen Yizhou.
The proposal suggests that the introduction of a stablecoin tied to the Hong Kong dollar could bolster Hong Kong’s standing in the blockchain industry and expedite the development of a digital Hong Kong dollar. This move could enhance transaction efficiency, lower transaction costs, upgrade existing payment systems, and further boost Hong Kong’s fintech prowess.
Furthermore, the Hong Kong Dollar stablecoin could improve the efficiency and inclusiveness of the city’s financial system. Its stability, exchange freedom, high security, openness, and cross-border liquidity could foster a broader spectrum of financial innovations.
Government’s Current Plan Is Overly Conservative
The proposal points out that the current plan of the SAR government, which only encourages private institutions to issue Hong Kong Dollar stablecoins, is overly conservative and doesn’t match its ambitious digital assets and economy agenda. It argues that private institution-issued stablecoins may not gain significant market share and could become marginalized, as exemplified by the Singapore Dollar stablecoin (XSGD) issued by Xfers, which has a market capitalization of just 6.6 million USD, compared to USDT and USDC’s 83 billion and 28 billion USD, respectively.
As such, the proposal strongly recommends that the SAR government issue a Hong Kong Dollar stablecoin, dubbed HKDG (G for Government), backed by the city’s foreign exchange reserves. This government-backed stablecoin would enjoy dual protections: government regulation and the transparency and immutability offered by blockchain contracts.
As of March 2023, Hong Kong’s foreign exchange reserves stood at 430 billion USD, far exceeding the combined market capitalization of USDT and USDC at 120 billion USD. A SAR government-backed HKDG could offer greater credibility and lower risk
Moreover, the proposal contends that the introduction of HKDG would enable Hong Kong to make significant strides towards de-dollarization and pose a challenge to the prevailing dominance of the U.S. Dollar within the crypto ecosystem.
Recently, Hong Kong has shown its intent to reclaim its status as a global crypto hub by establishing a web3 task force to build a robust ecosystem in the region.