Hong Kong authorities are seeking new designs for a central bank digital currency (CBDC), which is now proposing to issue a CBDC in the form of a government-backed stablecoin.
Wu Jiezhuang, a member of the Hong Kong Special Administrative Region Legislative Council, believes that turning the digital Hong Kong dollar (e-HKD) into a stablecoin would bring benefits for the adoption of new technologies such as Web3.
The option to convert e-HKD into a stablecoin has the potential to address the risks associated with virtual assets on Web3 effectively, Wu Jiezhuang said in an interview with China Blockchain News on Jan. 5. According to the lawmaker, such a design of the Hong Kong digital dollar would help authorities win the trust of investors in the Web3 industry and better protect users from problems such as hackers.
โAll the stablecoins that are currently available on the market are issued by some private companies and are not subject to government supervision,โ Wu Jiezhuang said, referring to failures of various stablecoin projects in 2022, causing a domino effect in the crypto market.
The lawmaker also noted that the stablecoin could be connected to decentralized finance (DeFi) for better access in Web3 ecosystems, stating:
โThe 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.โ
In addition to his role as a member of the Hong Kong Legislative Council, Wu Jiezhuang is also a founding member of G-Rocket, a start-up accelerator that aims to attract 1,000 Web3 companies settle in the city-state for the next three years. She co-founded G-Rocket with Hong Kong legislative council member Jonny Ng Kit-Chong in 2016.
Related: How Crypto Could Be Good For CBDCs And Vice Versa: An Industry Executive Explains
Wu Jiezhuang is the latest government official to highlight the potential benefits of combining CBDC and DeFi. Thomas Moser, a member of the board of directors of the Swiss National Bank, said 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 does not have to be a competitor to a private or decentralized cryptocurrency. At the same time, a CBDC could potentially diminish the role of private stablecoinsHe noticed.
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