A new policy proposal suggests that the Hong Kong government should introduce its own stablecoin, HKDG, backed by its substantial foreign exchange reserves. The proposal, co-authored by prominent figures including Vice Chancellor Wang Yang and angel investor Cai Wensheng, aims to position HKDG as a competitive alternative to existing stablecoins like USDT and USDC, a report in Wu Blockchian said.
The authors believe that a Hong Kong Dollar-pegged stablecoin would enhance financial inclusiveness, improve transaction efficiency, reduce costs, strengthen payment systems, and enhance the region’s fintech capabilities.
While the current plan allows private institutions to issue stablecoins, the authors argue that it lacks ambition and may result in limited market share. By leveraging Hong Kong’s foreign exchange reserves of approximately $430 billion, which exceeds the combined market capitalization of USDT and USDC, the proposed HKDG stablecoin backed by the government would offer higher credibility and lower risk.
The proposal acknowledges potential risks, such as legal and regulatory challenges, technical risks, and short-term exchange rate fluctuations. However, it suggests that government-issued HKDG would bear lower risks compared to stablecoins issued by private institutions. The authors highlight the benefits of government regulation and the transparency provided by blockchain technology in supporting the stability of HKDG.
Furthermore, the introduction of HKDG could contribute to Hong Kong’s efforts to challenge the dominance of the U.S. Dollar in the crypto ecosystem and pave the way for de-dollarization. It is believed that HKDG would provide additional liquidity for government investment projects, promote the digitization of traditional assets, encourage financial innovation and competitiveness, and increase transparency.
The proposal aligns with Hong Kong’s recent initiatives to establish itself as a global hub for the crypto industry. The formation of a web3 task force demonstrates the region’s commitment to fostering a thriving ecosystem for blockchain and digital currencies.
