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- The researchers aim to develop a stablecoin that can rival leading players in the market.
- They also contended that a domestic stablecoin could aid in de-dollarization initiatives.
On July 4, Cai Wensheng, Vice President of the Hong Kong University of Science and Technology, put forward the concept of an HKD stablecoin. The Hong Kong government did not endorse a similar policy proposal made by Wang Yang, Lei Zhibin, and Wen Yizhou.
The scholars seek to establish a stablecoin for the local currency that can compete with Tether (USDT) and Circle (USDC), the two dominant entities in the market. The proposal to issue an HKD stablecoin is believed to reinforce Hong Kong’s leadership in the blockchain sector, according to Chinese writer Wu Blockchain.
The rationale for this initiative includes supporting the local currency, enhancing transaction efficiency, reducing transaction costs, broadening current payment systems, and “further bolstering Hong Kong’s fintech capabilities.”
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Backed by Foreign Reserves
In its proposal, the government recognized that its current strategy has limitations, specifically that it permits only private entities to issue HKD stablecoins. They stated, “this measure is too conservative,” as it contradicts the government’s objectives of promoting the digital economy.
Consequently, the researchers recommend that the Hong Kong government establish a stablecoin called HKDG, backed by the approximately US$430 billion in foreign currency reserves that the region held as of March 2023. They also argued that a local stablecoin may assist in de-dollarization efforts.
Last month, Hong Kong unveiled new regulations for virtual asset service providers, and this month, it is working on establishing rules for stablecoins. While Hong Kong currently has the most defined crypto regulations of any Asian nation, the rest of Asia is rapidly catching up.
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