Experts Propose Hong Kong Government Issuance of Stablecoin to Compete with Tether and USD Coin

1:56 am
July 5, 2023
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A group of crypto and blockchain experts have put forth a report suggesting that the Hong Kong government issue a stablecoin tied to the Hong Kong dollar. This stablecoin would aim to challenge the dominance of Tether and USD Coin in the market.

The report, authored by four individuals involved in financial innovation, argues that the issuance of an HKDG (Hong Kong Dollar Government) stablecoin would support the government’s leadership in the digital economy. The authors of the report include Wang Yang, the vice president for institutional advancement at Hong Kong University of Science and Technology; Cai Wensheng, the founder of smartphone software firm Meitu; Lei Zhibin, an honorary chair of the Hong Kong Blockchain Association; and Wen Yizhou, a doctoral student.

The report highlights several potential benefits of launching the HKDG stablecoin, including challenging the dominance of the US dollar, providing liquidity for government projects, and facilitating risk assessment for officials. However, the report also acknowledges the potential risks associated with legal and regulatory challenges, international disputes, and security breaches.

According to the authors, the government-backed HKDG stablecoin would have higher credibility and lower risk compared to stablecoins issued by private institutions, especially considering the doubts surrounding the credibility of Tether and recent issues with USD Coin’s value.

Summary

A group of financial innovation experts, including individuals from Hong Kong University of Science and Technology and Meitu, have called for the Hong Kong government to issue a stablecoin tied to the Hong Kong dollar. The proposal aims to challenge the dominance of Tether and USD Coin. The experts argue that the government-issued stablecoin would have higher credibility and lower risk, while also providing benefits such as liquidity for government projects and facilitating risk assessment. However, the report acknowledges potential risks such as legal challenges, international disputes, and security breaches.

FAQ

What is a stablecoin?

A stablecoin is a type of cryptocurrency that is designed to have a stable value by being pegged to a specific underlying asset, such as a fiat currency like the US dollar or a commodity like gold.

What is Tether?

Tether is a popular stablecoin that is pegged to the US dollar. It is often used as a stable value in the cryptocurrency market, providing a way for traders and investors to move funds between exchanges without using traditional banks.

What is USD Coin?

USD Coin (USDC) is another stablecoin that is pegged to the US dollar. It is an ERC-20 token built on the Ethereum blockchain and is widely used in decentralized finance (DeFi) applications.

What are the potential benefits of issuing a stablecoin tied to the Hong Kong dollar?

The authors of the report suggest that issuing an HKDG stablecoin could challenge the dominance of the US dollar, provide liquidity for government projects, and facilitate risk assessment for officials. Additionally, it could enhance transaction efficiency, reduce transaction costs, and strengthen Hong Kong’s fintech capabilities.

What risks are associated with issuing a government-backed stablecoin?

The report acknowledges several potential risks, including legal and regulatory challenges, international disputes over transactions potentially tied to illicit funding, and the possibility of security breaches. The authors argue, however, that the risks of a government-backed stablecoin are significantly lower than those associated with stablecoins issued by private institutions.

Is the Hong Kong government considering issuing a stablecoin?

There is no official statement from the Hong Kong government regarding the issuance of a stablecoin at this time. The proposal put forth by the crypto and blockchain experts is part of an ongoing discussion surrounding the development of the digital economy and fintech capabilities in Hong Kong.

Sources:
– [CoinDesk](https://www.coindesk.com/markets/2023/07/05/advocates-call-for-hong-kong-govt-pegged-stablecoin-to-challenge-usdt-usdc/)
– [Wublock](https://wublock.substack.com/p/a-proposal-for-hong-kong-to-issue)


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