One Hong Kong official thinks that a government-backed stablecoin might serve as a better entry point to Web3 compared to private stablecoins.
Hong Kong authorities are now looking for new designs for a central bank digital currency (CBDC), now proposing to issue a CBDC in the form of a stablecoin backed by the government.
One member of the Legislative Council of the Hong Kong Special Administrative Region, Wu Jiezhuang, thinks that turning the Hong Kong digital dollar (e-HKD) into a stablecoin might offer benefits for the adoption of new technologies like the metaverse and Web3.
The option of developing e-HKD into a stablecoin has the potential to address the risks that are linked to virtual assets in Web3 effectively, Wu Jiezhuang said in an interview with China Blockchain News on January 5, 2023.
Based on the legislator, such a design of the Hong Kong digital dollar would enable the authorities to gain investors’ trust in the Web3 sector and better protect the users from issues like hacking. Wu Jiezhuang said:
“The stablecoins that are currently available in the market are all issued by some private companies and are not subject to government supervision.”
He was referring to the failures of several stablecoin projects in 2022, which resulted in a domino effect on the cryptocurrency market.
The legislator also pointed out that the stablecoin might be linked to decentralized finance (DeFi) for better access in Web3 ecosystems, saying:
“The Hong Kong government can consider whether the issuance of digital Hong Kong dollars can be connected with decentralized finance and become an important infrastructure component of the virtual asset trading platform.”
Besides his role as a Hong Kong Legislative Council member, Wu Jiezhuang is a founding member of G-Rocket, a startup accelerator that strives to attract 1,000 Web3 firms to set up shop in the city-state over the coming three years. He also co-founded G-Rocket with Hong Kong legislative council member Jonny Ng Kit-Chong in 2016.
Wu Jiezhuang is the latest government official to highlight the possible benefits of the combination of DeFi and CBDC. A governing board member at the Swiss National Bank, Thomas Moser, said in September 2022 that a CBDC may offer more stability to DeFi and mitigate the risks of its development.
Previously, the executive director at the digital asset hedge fund ARK36, Mikkel Morch, suggested that a central bank digital currency (CBDC) does not have to be a competitor to private or decentralized crypto. At the same time, a CBDC could diminish the role of private stablecoins, he noted.
