- The new steiblocoin will be backed by foreign exchange reserves
- Singapore has previously held a similar initiative
- Experts believe the government’s plan is not too ambitious
The Hong Kong government is considering issuing its own HKDG steiblocoin, which will be backed by foreign exchange reserves. This initiative aims to compete with existing stable coins, such as USDT and USDC. The new proposal writes that the introduction of a state-owned stablocoin would have a number of benefits. Namely, reducing costs, improving payment systems, dedollarization and strengthening the region’s fintech capabilities.
The paper’s authors point to the importance of creating stablcoin as a link between the traditional financial sector and the digital economy.
The experts also said that the current government plan, which allows private institutions to issue stablcoins, is not ambitious enough and could lead to a limited market share.. Parallels can be drawn between Singapore’s XSGD steblecoin, which was issued by Xfers, with a market capitalization of $6.6 million, compared to the more than $110 billion that USDT and USDC together.
The paper writes that as of March, Hong Kong had about $430 billion in currency reserves, which exceed the total market capitalization of USDT and USDC. Therefore, a government-backed HKDG token would provide more credibility and reduce risk.
The proposal also recognizes potential risks, such as legal and regulatory challenges and exchange rate fluctuations in the short term. However, they are lower compared to stable coins issued by private organizations.