Vice-President of Hong Kong University of Science and Technology (HKUST) suggested that the Hong Kong government should issue its own stablecoin, referred to as HKDG, to bolster the city’s digital economy.

 Stablecoins are cryptocurrencies that are designed to maintain a stable value relative to another asset, such as the US dollar or gold. They can be used for a variety of purposes, including as a means of payment, a store of value, or a way to hedge against volatility in other cryptocurrencies.

The HKMA’s current stance is that stablecoins must be fully backed by high-quality liquid assets and be subject to appropriate supervision and regulation. 

Therefore, if the Hong Kong government decides to issue a stablecoin, it will need to comply with these regulations. The potential benefits of issuing a stablecoin include increased financial inclusion, reduced transaction costs, and improved efficiency in the payment system.

 However, there are also risks associated with stablecoins, such as the potential for money laundering and terrorist financing.

 Therefore, it is important for the Hong Kong government to carefully consider the potential benefits and risks before deciding whether to issue a stablecoin.

What are the benefits of issuing a stablecoins for a government

Issuing a stablecoin can have several benefits for a government, including:

1. Lower transaction costs: Stablecoins can offer lower transaction costs compared to traditional payment methods, which can benefit both consumers and businesses.
2. Improved financial inclusion: Stablecoins can help connect unbanked or underbanked segments of the population to the financial system1.
3. Real-time payments: Stablecoins can offer real-time payments, which can be faster and more efficient than traditional payment methods1.
4. Increased efficiency: Stablecoins can improve efficiency in the payment system by reducing the need for intermediaries and streamlining the settlement process.
5. Global reach: Stablecoins can have global reach, which can benefit cross-border transactions.
6. Stability: Stablecoins are designed to maintain a stable value relative to another asset, such as the US dollar or gold, which can reduce volatility and provide stability to the market.

However, there are also risks associated with stablecoin, such as the potential for money laundering and terrorist financing.

 Therefore, it is important for the government to carefully consider the potential benefits and risks before deciding whether to issue a stablecoin.