- The scholars want to create a stablecoin that can compete with market leaders.
- They also argued that a local stablecoin may assist in de-dollarization efforts.
Hong Kong University of Science and Technology Vice President Cai Wensheng proposed the HKD stablecoin on July 4. The Hong Kong government did not support a similar policy suggestion offered by Wang Yang, Lei Zhibin, and Wen Yizhou.
The scholars want to create a stablecoin for the local currency that can compete with Tether (USDT) and Circle (USDC), the two market leaders. The idea to issue a HKD stablecoin will assist to cement Hong Kong’s dominance in the blockchain industry, claims Chinese writer Wu Blockchain.
The idea is warranted for a number of other reasons, including supporting the local currency, boosting transaction efficiency, lowering transaction costs, expanding existing payment systems, and “further strengthening Hong Kong’s fintech capabilities.”
Backed by Foreign Reserves
In its proposal, the government acknowledged that its existing approach had limitations, namely, that it encourages and allows only private institutions to produce HKD stablecoins. They said, “this measure is too conservative,” since it conflicts with the government’s goals of fostering the digital economy.
Therefore, the researchers propose that the government of Hong Kong create a stablecoin named HKDG backed by the roughly US$430 billion in foreign currency reserves that the region had as of March 2023. They also argued that a local stablecoin may assist in de-dollarization efforts.
Last month, Hong Kong introduced new rules for virtual asset service providers, and this month, it’s attempting to create rules for stablecoins. While Hong Kong has the most clear crypto rules of any Asian country at the moment, the rest of Asia is quickly following up.
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