- July 5, 2023
- Posted by: [email protected]
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Crypto and blockchain advocates have published a report urging the Hong Kong government to issue a stablecoin tied to the region’s dollar. This move is seen as a potential challenge to the dominance of Tether and USD Coin in the stablecoin market.
The report, co-authored by four individuals associated with financial innovation, suggests the creation of an HKDG (Hong Kong Dollar Government) stablecoin to support Hong Kong’s leadership in the digital economy. The authors of the report are Wang Yang, Vice President for Institutional Advancement at Hong Kong University of Science and Technology; Cai Wensheng, Founder of smartphone software firm Meitu; Lei Zhibin, Honorary Chair of the Hong Kong Blockchain Association; and Wen Yizhou, a doctoral student.
According to the report, issuing a stablecoin pegged to the Hong Kong dollar would not only solidify Hong Kong’s position in the blockchain sector but also advance the digital Hong Kong dollar. The stablecoin would enhance transaction efficiency, reduce costs, improve payment systems, and strengthen fintech capabilities in Hong Kong. Additionally, it could increase the efficiency and inclusiveness of the financial system, provide stability, security, openness, and cross-border liquidity to support a broader range of financial innovations.
According to the authors, the government’s present policy of encouraging private institutions to issue stablecoins pegged to the Hong Kong dollar is overly cautious in comparison to the government’s objective of supporting crypto and blockchain. The report highlights that Hong Kong’s foreign exchange reserves, amounting to approximately $430 billion as of March 2023, surpass the combined market capitalization of Tether and USD Coin, which is around $120 billion.
The report emphasizes that an HKDG stablecoin backed by the Hong Kong government would have higher credibility and lower risk compared to Tether, whose credibility is in question, and USD Coin, which has recently experienced severe discounts.
Benefits outlined in the report include the potential to challenge the dominance of the US dollar, provide additional liquidity for government projects, and enable better monitoring and risk assessment by officials. However, the authors acknowledge potential risks, including legal and regulatory challenges, international disputes related to transactions involving illicit funding, and security breaches.
The Hong Kong government announced in June the formation of a task force to oversee Web3 development. In addition to the approximately 800 fintech companies already operating in the region, the region has witnessed significant interest from over 80 digital asset and blockchain-related enterprises considering establishing a presence in Hong Kong.
