Hong Kong Explores Government-Backed Stablecoin for New Era of Digital Currency

A New Vision for Digital Currency

Hong Kong is stepping into the future of finance by considering a central bank digital currency (CBDC), specifically a stablecoin that would have the backing of the government. Wu Jiezhuang, a member of the Legislative Council of the Hong Kong Special Administrative Region, asserts that the evolution of the e-HKD into a stablecoin could play a crucial role in the adoption of innovative technologies such as Web3.

The Stability of Stablecoins

During an interview with China Blockchain News, Wu highlighted the potential for the e-HKD to address the inherent risks associated with virtual assets in the Web3 framework. He argues that this design can foster trust among investors and safeguard users against issues like hacking, which have plagued the crypto landscape in recent years.

The Need for Supervision

“The stablecoins available today are primarily issued by private companies without government oversight,” Wu pointed out, referring to the dramatic failures of several stablecoin projects in 2022. These incidents caused significant ripples in the crypto market, making the case for a state-backed alternative even more compelling.

Bridging CBDC and Decentralized Finance

Wu’s vision extends beyond merely creating a stablecoin; he envisions aligning the e-HKD with decentralized finance (DeFi) systems to enhance accessibility within Web3 ecosystems.

• Connecting the CBDC to DeFi could offer:
• Improved user experiences on virtual asset trading platforms.
• Increased investor confidence in digital transactions.

The G-Rocket Initiative

In addition to his legislative duties, Wu is a co-founder of G-Rocket, a startup accelerator designed to attract a thousand Web3 businesses to Hong Kong in the next three years. This bold vision highlights his commitment to transforming Hong Kong into a leading hub for digital innovation.

Global Insights on CBDCs and DeFi

Wu is not alone in recognizing the potential benefits of integrating CBDCs with DeFi. Experts like Thomas Moser of the Swiss National Bank and Mikkel Morch from ARK36 offer insights about how CBDCs could provide more stability for decentralized platforms and reduce dependency on private stablecoins. Their views accentuate that CBDCs could not only coexist but also thrive alongside private digital assets.