A group of crypto and blockchain advocates has published a report urging the Hong Kong government to introduce a stablecoin linked to the Hong Kong dollar, aiming to challenge the dominance of Tether and USD Coin.
The report, co-authored by prominent individuals in the financial innovation field, proposes the issuance of an HKDG (Hong Kong Dollar Government) stablecoin to bolster the government’s efforts in the digital economy.
The authors, including Wang Yang from the Hong Kong University of Science and Technology, Cai Wensheng, the founder of Meitu, Lei Zhibin, an honorary chair of the Hong Kong Blockchain Association, and doctoral student Wen Yizhou, argue that issuing a stablecoin pegged to the Hong Kong dollar would solidify the region’s leadership in the blockchain sector.
READ MORE: Co-Founders of Collapsed Three Arrows Capital Pledge Donation to Creditors
They believe it would enhance transaction efficiency, reduce costs, improve payment systems, and strengthen Hong Kong’s fintech capabilities.
Additionally, they assert that a Hong Kong Dollar stablecoin would increase the efficiency and inclusiveness of the financial system, provide stability, security, and cross-border liquidity, supporting a broader range of financial innovations.
The authors criticize the government’s current strategy of encouraging private institutions to issue stablecoins pegged to the Hong Kong dollar as “too conservative” in comparison to its crypto and blockchain promotion goals.
The report highlights that Hong Kong’s foreign exchange reserves in March 2023 amounted to approximately $430 billion, surpassing the combined market capitalization of Tether and USD Coin, which stood at around $120 billion.
The proposed HKDG, backed by the government, is deemed to possess higher credibility and lower risk compared to existing stablecoins, particularly given concerns about the credibility of Tether and recent discounts experienced by USD Coin.
The authors outline several potential benefits of launching HKDG, including challenging the dominance of the US dollar, providing additional liquidity for government projects, and facilitating risk assessment by officials.
However, the report acknowledges potential risks, such as legal and regulatory challenges, international disputes related to illicit funding, and hacking incidents.
In June, the Hong Kong government established a task force to oversee the development of Web3.
The region has seen growing interest from over 80 digital asset and blockchain-related companies considering establishing a presence in Hong Kong, in addition to the already existing 800 fintech companies.
Overall, the report recommends the issuance of an HKDG stablecoin by the Hong Kong government to propel the region’s digital economy, enhance financial systems, and bolster its position as a leader in the blockchain sector.
