Hong Kong authorities are seeking new designs for a central banking digital currency (CBDC) and now propose to issue a CBDC as a stablecoin that is backed by government.
Wu Jiezhuang is a member of the Legislative Council of the Hong Kong Special Administrative Region. He believes that turning the Hong Kong digital dollars (e-HKD), into a stablecoin will help with the adoption of new technologies such as Web3.
Wu Jiezhuang believes that eHKD can be developed into a stablecoin, which could effectively address the risks associated virtual assets in Web3. said Interview with China Blockchain News, Jan. The lawmaker stated that such a design for the Hong Kong digital currency would allow authorities to gain investor trust in the Web3 sector and protect users better from hacks.
“The stablecoins that are currently available in the market are all issued by some private companies and are not subject to government supervision,” Wu Jiezhuang said, referring to failures of several stablecoin projects in 2022, which caused a domino effect on the crypto market.
Additionally, the lawmaker suggested that the stablecoin could connect to Decentralized Finance (DeFi), which would allow for easier access to Web3 ecosystems.
“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.”
Wu Jiezhuang, in addition to his role as a Hong Kong Legislative Council Member, is also a founding member at G-Rocket. This startup accelerator aims to attract 1,000 businesses via Web3 to establish shop in the city-state within the next three-years. In 2016, he co-founded G-Rocket along with Jonny Ng Kit-Chong, a member of Hong Kong’s legislative council.
Related: An industry executive explains why crypto could be beneficial for CBDC.
Wu Jiezhuang is now the latest official to speak out about the potential benefits that CBDC and DeFi can have. Thomas Moser, a member of the Swiss National Bank’s governing board, stated in September 2022, that a CBDC would provide DeFi with more stability and lower the risk of its development.
Previously, Mikkel Morch, executive director at the digital asset hedge fund ARK36, suggested that a CBDC doesn’t have to be a competitor to a private or decentralized cryptocurrency. A CBDC could also reduce the importance of private stablecoins.