As stablecoins grow, Hong Kong’s US dollar peg seen as advantage despite Web3 challenges



The growing strength of stablecoins as a bridge between Web3 and traditional finance could give an edge to markets like Hong Kong, which has its currency pegged to the US dollar (USD), but the Asian financial hub still faces challenges in attracting major blockchain businesses.

The Hong Kong dollar’s peg to the US currency is seen as a unique advantage for the city, as the majority of stablecoin trading activity happens through cryptocurrencies backed by the US dollar. This can help smooth out business operations for companies whose main asset holdings are also pegged to the USD, including the largest stablecoins Tether (USDT) and Circle’s USD Coin (USDC).

“Hong Kong has long been a global financial hub with a deep and liquid foreign exchange market, supported by a regulatory environment that facilitates currency conversion,” said David Katz, the Asia-Pacific vice-president of strategy and policy at Circle. “Its peg to the US dollar and strong banking infrastructure make it an attractive location for USD conversions.”

The preference for US dollar-backed stablecoins is so strong that some have seen the technology has further entrenching the dollar’s position in global finance, as a one-for-one peg requires a large reserve of the currency – something that is increasingly being enforced by law, including in Hong Kong with its pending stablecoin regulation.

“The reality is everybody, everywhere in the world – China and everywhere else included – wants dollars,” said Chris Maurice, CEO of the Africa-focused stablecoin exchange Yellow Card. “This is why you have US$200 billion now in market cap in USD stablecoins.”

Maurice spoke on the sidelines of the Consensus Hong Kong Web3 conference on February 18. He attended the event, organised by the crypto news outlet CoinDesk, in search of new business opportunities coming out of China as the country’s ties with Africa grow. He said he had meetings with a number of major Chinese tech firms.



Source link

Latest Posts

Scroll to Top