Crypto and blockchain advocates are urging the Hong Kong government to take a significant step forward by issuing its own HKDG stablecoin, pegged to the Hong Kong dollar. This proposal aims to consolidate Hong Kong’s leadership in the blockchain sector.
Advocates’ Proposal: The HKDG Stablecoin
Chinese crypto reporter Colin Wu provided an English translation of the report on July 3rd. The proposal, authored by four prominent individuals in the financial innovation field, emphasizes the importance of the Hong Kong government issuing an HKDG (Hong Kong Dollar Government) stablecoin.
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, an honorary chair of the Hong Kong Blockchain Association; and doctoral student Wen Yizhou co-authored the paper.
Benefits and Implications
The advocates further highlight numerous benefits that would accompany the launch of the HKDG stablecoin. Firstly, it would strengthen Hong Kong’s position in the blockchain sector and boost the digital economy. This is by enhancing transaction efficiency, reducing costs, and improving payment systems.
Secondly, the HKDG stablecoin would increase the efficiency and inclusiveness of Hong Kong’s financial system. This will as a result, support a wider range of financial innovations.
Superiority over Private Stablecoins
The authors argue that the government’s current approach, encouraging private institutions to issue stablecoins, is too conservative compared to the broader goal of promoting crypto and blockchain adoption. They emphasize the significance of backing the HKDG stablecoin with the Special Administrative Region (SAR) government, enhancing its credibility and reducing risks.
This move would be particularly crucial, considering the questions surrounding the credibility of Tether (USDT) and recent incidents with USD Coin (USDC).
Addressing Risks and Challenges
While the proposal presents a promising outlook, it acknowledges potential risks and challenges. These include legal and regulatory hurdles, as well as international disputes concerning transactions potentially linked to illicit funding and security concerns like hacks.
Despite these risks, the report emphasizes that the risks borne by a government-issued HKDG stablecoin are significantly lower than those of privately-issued Hong Kong Dollar stablecoins.
Hong Kong has demonstrated its commitment to blockchain development, as evidenced by the formation of a task force dedicated to overseeing the advancement of Web3. Additionally, the region has witnessed a growing interest from over 80 digital asset and blockchain companies, with plans to establish a presence in the SAR.
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