Hong Kong authorities are seeking new designs for a central bank-issued digital currency (CBDC), and are now proposing to issue one in the form of a stablecoin that is backed by the government.
Wu Jiezhuang, a member of the Legislative Council of the Hong Kong Special Administrative Region, believes that turning the digital Hong Kong dollar (e-HKD) into a stablecoin would bring benefits for the adoption of new technologies such as Web 3.0.
The option to convert e-HKD into a stablecoin has the potential to effectively address the risks associated with virtual assets in Web 3.0, Wu Jiezhuang said in an interview with China Blockchain News on Jan. 5. According to the legislator, This Hong Kong digital dollar design would help authorities win the trust of investors in the Web 3.0 industry and better protect users from problems such as hacking.
“The stablecoins that are currently available on the market are all issued by some private companies and are not subject to government supervision,” said Wu Jiezhuang, referring to the failures of various stablecoin projects in 2022, which caused a ripple effect in the cryptocurrency market.
The legislator also pointed out that the stablecoin could be connected to decentralized finance (DeFi) for better access in the Web 3.0 ecosystems, stating:
“The Hong Kong government may consider whether the issuance of digital Hong Kong dollars can connect with decentralized finance and become an important infrastructure component of the virtual asset trading platform.”
Aside from his role as a member of the Hong Kong Legislative Council, Wu Jiezhuang is also a founding member of G-Rocket, a startup accelerator that aims to attract 1,000 Web 3.0 companies to establish themselves in the city-state in the next three years. He co-founded G-Rocket with Jonny Ng Kit-Chong, a member of the Hong Kong Legislative Council, in 2016.
Wu Jiezhuang is the latest official to have highlighted the potential advantages of combining a CBDC and DeFi. Thomas Moser, a member of the governing council of the Swiss National Bank, claimed in September 2022 that a CBDC could provide more stability to DeFi and reduce the risks of its development.
Previously, Mikkel Morch, CEO of digital asset hedge fund ARK36, suggested that a CBDC need not compete with a private or decentralized cryptocurrency. At the same time, he noted that a CBDC could reduce the role of private stablecoins.
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