Hong Kong University of Science and Technology Vice President Wang Yang: Seize the opportunity to issue a government-backed Hong Kong dollar stable currency

![Vice President of Hong Kong University of Science and Technology Wang Yang: seize the opportunity to issue a Hong Kong dollar stable currency supported by the government] (https://img-cdn.gateio.im/resized-social/moments-69a80767fe-13696842f5-dd1a6f-1c6801)

Author丨Wang Yang & Wen Yizhou

EDIT丨Tyler

In the previous article “Proposal for Hong Kong to Issue a Hong Kong Dollar Stablecoin Backed by Foreign Exchange Reserves”, we advocated the introduction of a Hong Kong dollar-based stablecoin (HKDG), backed by Hong Kong’s current foreign exchange reserves of up to US$430 billion. We believe that this move will bring additional liquidity to Hong Kong, revitalize the financial market, and facilitate major benefits such as government investment projects and important national development strategies.

Although there is no official response from the government, our proposal has aroused broad and positive responses in society. Given the rapid developments in the digital asset space, particularly the tokenization of real world assets (RWA) and plans by major entities to launch their own stablecoins, these developments underscore the urgency of issuing HKDG, which we also include in this follow-up article Further elaborate on our position.

1.Real World Asset (RWA) Tokenization and Stablecoin Demand Is About to Surge

RWA tokenization, the transformation of tangible or intangible assets into digital tokens, is a groundbreaking shift in the digital asset space and has the potential to redefine the market landscape. Through blockchain technology, RWA tokenization improves transaction transparency, strengthens security, and expands liquidity by enabling partial ownership. This approach not only solves the inefficiency of the traditional financial system, but also narrows the gap between the digital asset field and the real economy, thereby promoting the development of Web3.

**2.**The digital asset market will explode

At present, the market value of the U.S. debt and the global real estate market alone have reached 240 trillion and 280 trillion U.S. dollars respectively, not to mention other real assets. Even if even 1% of these assets are traded through RWA tokens, All will have a significant impact on the digital asset market. The digital asset market is set to explode as tokenization permeates every asset class, from commodities to intellectual property.

It is foreseeable that due to regulatory restrictions on RWA tokenization, most of the flow of RWA tokens on public blockchains will occur in the form of stablecoins. Therefore, we must be prepared for a sharp expansion of the stablecoin market cap.

As we discussed in our previous article, Hong Kong is uniquely positioned to lead this revolution. However, this prospect hinges on Hong Kong’s timely issuance of its reserve-backed stablecoin, HKDG. Hong Kong will miss out if it falls behind major U.S. entities that are already preparing to issue large amounts of USD stablecoins.

It is worth mentioning that it is not enough for commercial institutions in Hong Kong to issue their own Hong Kong dollar stablecoins. Different institutions issuing their own versions of Hong Kong dollar stablecoins lead to fragmentation and confusion, because these institutions do not have enough volume to challenge mature U.S. dollar stablecoins such as USDT. If the stablecoin HKDG supported by foreign exchange reserves is not issued through a unified layout, the independent issuance of stablecoins by institutions will undoubtedly become a marginalized niche product, which will not be able to form a mature US dollar stablecoin that challenges the climate. Worse, it fosters a false sense of progress that masks the reality of missed opportunities.

Here we can also consider adopting a compromise strategy, which is to allow the government to authorize commercial institutions to issue a unified HKDG stable currency. This kind of scheme may stimulate the enthusiasm of commercial organizations to participate more, but it will also bring many new challenges. These challenges cover book preparation, regulatory balance of benefits and risks, insurance, custody, security and a series of unresolved issues.

The impetus for commercial institutions to issue stablecoins comes largely from the current high interest rate environment. However, once interest rates fall, these institutions will inevitably pursue higher returns, which may increase risks. At the same time, if the regulation is too strict, these issuers may not be able to profit from it, thus losing the motivation for sustainable development. In addition, under this plan, the SAR government will not be able to enjoy the benefits brought by the issuance of HKDG. Therefore, we should look at this staged strategy of the government authorizing commercial organizations to issue HKDG from an overall perspective, and take the government’s unified issuance of HKDG as our ultimate goal, and continue to work hard for it.

**3.**Consolidate Hong Kong dollar’s global status and challenge the US dollar’s dominance

While the Hong Kong dollar is readily exchangeable for other currencies, it is rarely used in international trade or as a global reserve currency, perhaps because of its peg to the U.S. dollar. If Hong Kong can seize the opportunity of RWA tokenization to issue HKDG, the potential of the Hong Kong dollar as an international currency is bound to be greatly enhanced, and it may even challenge the US dollar’s dominance in some areas.

**4.**The “window of opportunity” is only one year

We have previously pointed out that the launch of HKDG can enhance the international status of the Hong Kong dollar, especially in the field of digital assets. Given that both USDT and USDC stablecoins have experienced reputation crises, the market demand for high-credibility stablecoins is very strong. With the support of the SAR government’s foreign exchange reserves, HKDG will enjoy unparalleled credibility. Since the Hong Kong dollar is pegged to the U.S. dollar, HKDG could be an attractive option to challenge the dominance of the U.S. dollar stablecoin.

We believe that the timely issuance of HKDG, coupled with the imminent emergence of tokenization of RWA, can lay the foundation for strengthening the internationalization of the Hong Kong dollar and provide a way to challenge the dominance of the US dollar. While the stablecoin market is currently small relative to the global economy, with the momentum of RWA tokenization strong, the stablecoin market will usher in a boom. If HKDG can gain a favorable position early and gain a firm foothold before major US financial giants enter the market, HKDG can maintain its leading position even after the stablecoin market surges. If the market capitalization of the RWA tokenization market reaches trillions, and HKDG can capture 10% of the stablecoin market, it will be a major victory for the internationalization of the Hong Kong dollar and a substantial challenge to the dominance of the US dollar.

**5.**Summary

We once again strongly urge the SAR government to take action to issue HKDG. We have a narrow window of opportunity to really make Hong Kong a major international hub for Web3. We expect this window of opportunity to be open for a year or so at most. This is an important layout: it is not only related to whether Hong Kong can become the world center of digital assets and Web3 development, but also related to the national strategic goal of challenging the dominance of the US dollar. We must seize this historical opportunity. Hong Kong can’t afford to wait, let alone national strategy.

The authors are vice president of Hong Kong University of Science and Technology and chief scientific advisor of Hong Kong Web3.0 Association

PhD Candidate at Hong Kong University of Science and Technology