Hong Kong’s stablecoin strengthens blockchain leadership and drives digital currency advancement, according to the report.
Crypto and blockchain advocates have authored a report urging the Hong Kong government to introduce a stablecoin tied to the local currency. This stablecoin has the potential to rival the widespread use of Tether and USD Coin and bring about a shift in their dominance within the market.
Four individuals involved in financial innovation, including Wang Yang from Hong Kong University of Science and Technology, Cai Wensheng from Meitu, Lei Zhibin from the Hong Kong Blockchain Association, and doctoral student Wen Yizhou, co-authored a paper proposing the issuance of an HKDG (Hong Kong Dollar Government) stablecoin.
Their suggestion aims to support Hong Kong’s leadership in the digital economy. This information was provided through a translation of a report by Chinese crypto reporter Colin Wu on July 3rd.
According to the report, issuing a stablecoin linked to the Hong Kong dollar serves multiple purposes. It helps solidify Hong Kong’s position as a leader in the blockchain sector and drives progress in the digital Hong Kong dollar.
The stablecoin offers advantages such as improved transaction efficiency, reduced costs, enhanced payment systems, and strengthened fintech capabilities.
Additionally, it can contribute to a more efficient and inclusive financial system, providing stability, exchange freedom, high security, openness, and cross-border liquidity to support a wider range of financial innovations in Hong Kong.
A Proposal for Hong Kong to Issue a Hong Kong Dollar Stablecoin to Compete with USDT/USDC
By Vice President of Hong Kong University of Science and Technology and Chairman of Meitu
Read more: https://t.co/pCTxkqMLM7
— Wu Blockchain (@WuBlockchain) July 4, 2023
Yang, Wensheng, Zhibin, and Yizhou expressed their belief that the government’s strategy of promoting private institutions to issue stablecoins tied to the Hong Kong dollar was too cautious compared to its objective of advancing crypto and blockchain.
The report highlighted that Hong Kong’s foreign exchange reserves, amounting to approximately $430 billion as of March 2023, far exceeded the combined market capitalization of Tether USDT and USD Coin, which stood at around $120 billion. This suggested that Hong Kong possessed significant financial resources to support its own stablecoin initiatives.
The report emphasized that an HKDG stablecoin backed by the Hong Kong SAR government would possess greater credibility and lower risk. This is particularly relevant considering the ongoing concerns regarding the credibility of USDT and recent instances of significant discounts observed with USDC.
By offering a stablecoin supported by the government, Hong Kong aims to provide a more trustworthy and secure alternative to existing stablecoins in the market.
According to the report, the launch of HKDG could bring several advantages. It could challenge the prevailing dominance of the US dollar, offer increased liquidity for government initiatives, and facilitate better risk monitoring by officials.
However, the report also acknowledged potential risks associated with the initiative. These risks include legal and regulatory obstacles, international disputes regarding transactions involving illicit funding, and the possibility of cyberattacks and security breaches.
The report stated that the risks associated with the government-issued HKDG are considerably lower compared to the Hong Kong Dollar stablecoin issued by private institutions.
In June, the Hong Kong government revealed the creation of a task force dedicated to supervising the development of Web3 technologies. As of March, over 80 companies engaged in digital assets or blockchain were reportedly contemplating establishing a presence in Hong Kong, in addition to the approximately 800 existing fintech companies already operating in the region.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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