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Lawyers call on Hong Kong government stablecoin to compete with Tether and USD Coin

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Crypto and blockchain advocates have written a report calling on the Hong Kong government to issue a stablecoin pegged to the country’s dollar, which could challenge the dominance of Tether (USDT) and USD Coin (USDC).

According to an English translation of a July 3 report provided by Chinese crypto journalist Colin Wu, four people linked to financial innovation propose the government is issuing a HKDG (Hong Kong Dollar Government) stablecoin to support its leadership efforts in the digital economy. Wang Yang, vice president for institutional advancement at Hong Kong University of Science and Technology, Cai Wensheng, founder of smartphone software company Meitu, Lei Zhibin, honorary chairman of the Hong Kong Blockchain Association, and the doctoral student Wen Yizhou co-authored the article. .

“The issuance of a Hong Kong dollar-pegged stablecoin not only helps cement Hong Kong’s leadership in the blockchain industry, but also propels the rise of the Hong Kong digital dollar, improving transaction efficiency. , reducing transaction costs, improving current payment systems, and further strengthening Hong Kong’s fintech capabilities,” the report states. “In addition, the Hong Kong dollar stablecoin can improve the efficiency and inclusiveness of the financial system. of Hong Kong; its stability, free trade, high security, openness and cross-border liquidity can support a wider range of financial innovation.

Yang, Wensheng, Zhibin and Yizhou argued that the government’s plan to encourage private institutions to issue Hong Kong dollar-pegged stablecoins was “too conservative” contrary to its intention to promote crypto and blockchain. The report claimed that Hong Kong’s foreign exchange reserves as of March 2023 totaled around $430 billion, “significantly exceeding” the combined market capitalization of USDT and USDC at around $120 billion.

“HKDG backed by the SAR government will have higher credibility and lower risk (…) especially as the credibility of USDT remains in question, and USDC has recently seen steep discounts. “

Related: Hong Kong will open access to crypto exchanges for retail users, but there’s a catch

Among the benefits that the report’s authors said could come from launching HKDG were challenging the dominance of the US dollar, providing additional liquidity for government projects, and allowing officials to monitor and easier to assess risks. However, the report cites potential risks, including legal and regulatory challenges, international disputes over transactions potentially linked to illicit finance, and hacks.

“The risks borne by the government-issued HKDG are significantly lower than those of the Hong Kong dollar issued by private institutions,” the report said.

In June, the Hong Kong government announced that it had formed a task force to oversee the development of Web3. More than 80 companies involved in digital assets or blockchain are said to have considered establishing a presence in the SAR in March, in addition to the roughly 800 fintech companies already present in Hong Kong.

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