Hong Kong Considers CBDC Stablecoin for Web3 Growth

Wu Jiezhuang, a member of the Legislative Council of the Hong Kong Special Administrative Region, has put forward a proposal to transform the digital Hong Kong dollar (e-HKD) into a government-regulated stablecoin. This approach marks a departure from current stablecoin models, which are primarily issued by private companies without direct government oversight. The legislator emphasized that the failures of several private stablecoin projects in 2022 demonstrated the vulnerabilities of the current system and the need for government-backed alternatives.

In his interview with China Blockchain News on January 5, Wu Jiezhuang argued that converting the e-HKD into a stablecoin would efficiently address the dangers associated with virtual assets in Web3 environments. The proposal suggests that a government-backed digital currency could serve as a regulated, secure option for investors while encouraging the adoption of cutting-edge innovations like Web3.0. This aligns with views expressed by Thomas Moser of the Swiss National Bank, who noted in September 2022 that CBDCs could offer DeFi more security and reduce expansion risks.

The stablecoin proposal forms part of a broader strategy to attract Web3 companies and investors to Hong Kong. According to Wu Jiezhuang, creating a digital Hong Kong dollar as a stable economy option would help the government gain the trust of investors in the Web3 industry. He suggested that Hong Kong could establish a virtual asset regulatory agency, develop the digital HK dollar infrastructure, and enact laws to prevent cyber theft as complementary measures to build comprehensive investor protection.

Wu Jiezhuang’s vision extends beyond mere currency innovation. As one of the founders of G-Rocket, a startup accelerator aiming to attract 1,000 Web3 companies to Hong Kong over three years, he sees the government-backed stablecoin as critical infrastructure for virtual asset trading platforms. The design would link the digital Hong Kong dollar to decentralized finance networks, creating what he describes as a major infrastructure element for the trading platform for virtual assets.

Hong Kong has been actively developing its regulatory approach to virtual assets, with financial service providers recently beginning to offer services to normal investors. Brokers and investment managers in the region are reportedly seeking guidance on licensing requirements ahead of new regulations. This regulatory development creates the necessary foundation for the proposed CBDC stablecoin initiative, ensuring that the digital currency operates within a well-defined legal framework.

The timing of this proposal reflects Hong Kong’s strategic positioning in the global digital asset landscape. By creating a government-regulated stablecoin, Hong Kong aims to distinguish itself from other jurisdictions while addressing the regulatory gaps that have led to stablecoin failures. The initiative represents a careful balancing act between fostering innovation and implementing necessary safeguards, potentially setting a new standard for how governments can engage with decentralized finance networks while maintaining financial stability and investor protection.