A new policy proposal is urging the Hong Kong government to issue its own stablecoin, HKDG, backed by the region’s foreign exchange reserves. The proposal aims to establish a competitor to existing stablecoins such as USDT and USDC. Co-authored by prominent figures including Wang Yang, Vice Chancellor of the Hong Kong University of Science and Technology, the paper highlights the benefits of a Hong Kong Dollar-pegged stablecoin in terms of financial inclusiveness, transaction efficiency, cost reduction, payment system improvement, and fintech capabilities.
The proposal argues that the government’s current plan, which allows private institutions to issue stablecoins, is insufficient and may result in limited market share. By leveraging Hong Kong’s substantial foreign exchange reserves of approximately $430 billion, an HKDG stablecoin issued by the government would offer greater credibility and lower risk. The authors acknowledge potential challenges such as legal and regulatory hurdles, technical risks, and short-term exchange rate fluctuations, but contend that government-backed stablecoins carry lower risks compared to those issued by private entities.
The proposed HKDG stablecoin would benefit from government regulation and the transparency afforded by blockchain technology. It is also seen as a significant step toward reducing the dominance of the U.S. Dollar in the crypto ecosystem and promoting financial innovation and competitiveness. The policy proposal aligns with Hong Kong’s recent efforts to position itself as a global crypto hub by establishing a web3 task force aimed at fostering a thriving ecosystem in the region.