Hong Kong authorities are looking for a new design for a central bank digital currency (CBDC), now proposing to issue CBDC in the form of a government-backed stablecoin.
Wu Jiezhuang, a member of the Legislative Council of the Hong Kong Special Administrative Region, believes that turning the Hong Kong digital dollar (e-HKD) into a stablecoin will bring benefits to the adoption of new technologies like Web3.
The option of developing e-HKD into a stablecoin has the potential to effectively address the risks associated with virtual assets on Web3, Wu Jiezhuang said in an interview with China Blockchain News on January 5. According to lawmakers, the design of Hong Kong’s digital dollar will help the authorities gain investor confidence in the Web3 industry and protect users from problems like hacks.
“The stablecoins currently available in the market are all issued by some private companies and are not subject to government supervision,” said Wu Jiezhuang, referring to the failure of some stablecoin projects in 2022, which caused a domino effect on the crypto market.
The MP also stated that stablecoins can be connected to decentralized finance (DeFi) for better access to the Web3 ecosystem, stating:
“The Hong Kong government can consider whether the issuance of digital Hong Kong dollars can be linked to decentralized finance and become an important infrastructure component of a virtual asset trading platform.”
In addition to his role as a member of Hong Kong’s Legislative Council, Wu Jiezhuang is also a founding member of G-Rocket, a startup accelerator that aims to attract 1,000 Web3 businesses to set up shop in the city-state over the next three years. He founded G-Rocket with Hong Kong legislative councilor Jonny Ng Kit-Chong in 2016.
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Wu Jiezhuang is the latest government official to highlight the potential benefits of the combination of CBDC and DeFi. Thomas Moser, a member of the governing board of the Swiss National Bank, said in September 2022 that CBDC can provide DeFi stability and reduce the risk of its development.
Previously, Mikkel Morch, executive director at digital asset hedge fund ARK36, suggested that CBDC should not be a competitor to private or decentralized cryptocurrency. At the same time, CBDCs could reduce the role of private stablecoins, he said.