Hong Kong Experts Propose Government to Issue HKDG Stablecoin

Advantages of stablecoins

On the 3rd, a Hong Kong expert published a document recommending the Hong Kong government to issue its own stablecoin “HKDG”.

HKDG is a stablecoin linked to the Hong Kong dollar (HKD), where the “G” stands for “Government”. Unlike stablecoins such as USDT and USDC, it claims that it is possible to circulate a highly reliable and low-risk stablecoin by issuing it from a government rather than a private company.

This proposal was made by four people, including the Chief Scientific Advisor of the Hong Kong Web3.0 Association. Hong Kong, which aims to become the center of crypto assets (virtual currencies) and blockchain, is currently developing regulations for stable coins.

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The proposal enumerates the technical advantages of stablecoins, such as improved payment efficiency and reduced payment costs. He also mentioned that Hong Kong can strengthen its position as a leader in the blockchain area and that it can promote financial innovation, such as promoting financial inclusion.

HKDG is issued backed by foreign exchange reserves. According to this proposal, as of March 2023, Hong Kong’s foreign exchange reserves will amount to US$430 billion (approximately ¥62 trillion). He pointed out that the total market capitalization of USDT and USDC is US$120 billion (about 17 trillion yen), and that Hong Kong’s foreign exchange reserves are significantly higher.

He argued that USDT is not reliable enough, and mentioned that USDC recently dropped from $1. HKDG has the potential to challenge the US dollar stablecoin monopoly and become a mainstream stablecoin in the blockchain and digital asset ecosystem.

He also argues that it is difficult to shake the hegemony of the US dollar with HKDG alone, but that combining blockchain and digital asset technologies may lead to “de-dollarization”.

Although there are hurdles such as the need for regulatory development with other countries and countermeasures against hacking, it still has advantages over stablecoins issued by private companies.

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Movements surrounding stablecoins

Hong Kong started new regulations on cryptocurrency exchanges last month. Subject to its rules, it also authorizes it to serve individual investors. At that time, it said that stablecoins would not be available to individual investors until regulations were put in place.

Last month, Hong Kong-based custody firm First Digital announced the launch of a US dollar stablecoin, First Digital USD (FDUSD). FDUSD will be issued on the BNB smart chain.

The stablecoin is targeting a global market, but will also develop a cooperative relationship with Hong Kong regulators, he said.

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