Crypto Advocates Ask Hong Kong’s Government to Issue a Stablecoin to Compete with USD Coin and Tether
Hong Kong is currently working on several proposals to set up a new crypto-friendly commercial region. One such proposal under review is the issuance of a new stablecoin project that would be pegged to the Hong Kong Dollar.
This stablecoin aims to work in the same manner that two of the biggest stablecoin projects operate namely USDC and Tether. However, the proposal has suggested the government of Hong Kong issue the stablecoin in question.
In this case, the stablecoin is going to be pegged to the foreign reserves of the Hong Kong Central Bank. The project could be named HKDG and it might go head-to-head with other popular stablecoins in the marketplace namely USDT and USDC.
The proposal for the state-sanctioned stablecoin has been published by Wang Yang who is currently serving as the Vice chancellor at the University of Science and Technology. Yang is also the Chief Science Advisor at Hong Kong Web3 Association.
There are also other contributors to the proposal such as names like Cai Wensheng, Lei Zhibin and Wen Yizhou.
The experts in Hong Kong have maintained that the government’s prior plans to let private enterprises issue a stablecoin can lead to limited market share. Some have presented the example of XSGD, a stablecoin project issued by a Singapore-based firm named Xfers.
The firm had a market cap of $6.6 million which competed against the combined market share of $110 million of both USDT and USDC stablecoins. Meanwhile, the proposal for the HKDG stablecoin sheds light on its utility as transparency, reducing gas, faster transaction speed, better security, and bridging the gap between the traditional and decentralized financial networks.
As of March, the total foreign reserves of Hong Kong were valued at $430 billion. Henceforth, it is bigger in volume in comparison to the combined market caps of Tether and Circle stablecoins.
The HKDG stablecoin will also inherit the credibility and low risk associated with the Hong Kong Central Bank as mentioned in the proposal. At the same time, the proposal reflected on the issues that are concerned with the risks and constraints associated with stablecoin issuance.
Web3 Association Claims Government-issued Stablecoin is Better than a Private Project
When addressing the potential challenges and risks that are associated with the HKDG stablecoin the proposal shared some important points. It mentioned the biggest roadblocks for the stablecoin in question such as technical risks, slippage differences in the short-term, etc.
However, at the same time, the paper has maintained that a stablecoin that is issued and backed by the government of Hong Kong is going to be more secure and safer.
At the same time, the paper has also talked about the role of HKDG in de-dollarization and shifting the domination of USD in crypto-economics.
The authors of the proposal have maintained that the HKDG stablecoin can become successful by leveraging the regulatory clarity from the government and maintaining transparency using blockchain infrastructure. Additionally, the paper also talked about additional liquidity that stablecoin can bring.
