Hong Kong is looking to launch its stablecoin, HKDG, to rival the likes of USDT and USDC. The coin would be backed by the city’s foreign exchange reserves, giving it a level of stability that other stablecoins lack.
A new report suggesting that Hong Kong should launch its stablecoin, HKDG, backed by its foreign exchange reserves was co-authored by Wang Yang, vice chancellor of the Hong Kong University of Science and Technology, chief scientific advisor of the Hong Kong web3 Association, angel investor Cai Wensheng, BlockCity founder Lei Zhibin, and doctoral candidate Wen Yizhou. Wu Blockchain was the first to report the news.
They are confident that a Hong Kong Dollar-pegged stablecoin can make a positive impact on the financial landscape in Hong Kong, by increasing access to financial services, making payments faster and cheaper, and helping to grow the fintech industry.
According to the authors, companies and consumers would be more inclined to embrace a stablecoin that was issued by the government as compared to a private entity since it would be seen as more reliable and trustworthy.
The authors compare Singapore’s XSGD stablecoin, issued by Xfers, to the combined market capitalization of USDT and USDC, which is $110 billion. XSGD’s market capitalization is only $6.6 million, which is a fraction of the size of USDT and USDC.
The policy acknowledges that there are risks associated, but the authors argue that these risks are lower than those of stablecoins launched by private entities. They point to the fact that a government-issued HKDG would be backed by Hong Kong’s vast foreign exchange reserves, which would provide a level of stability that is not available with other stablecoins.
The policy contends that a government-issued HKDG stablecoin would be more regulated than private-issued stablecoins, which would provide greater confidence for users and investors. They believe that this would make the stablecoin more widely accepted and used, which would benefit the Hong Kong economy as a whole.
The authors believe that a HKDG stablecoin could help to digitize traditional assets, making them more accessible and liquid. This could lead to increased investment in these assets and boost financial inclusion.
The authors conclude that HKDG may act as a “catalyst” for change in the international financial system, posing a challenge to the US dollar’s hegemony and fostering a more multipolar global order.
The government said in June that a task group had been established to direct the development of Web3 to position Hong Kong as a leading center for innovation.