The Chairman of the Hong Kong Institute for International Finance (HKIIF), Xiao Geng, recently brought attention to the advantages of introducing a CNY-pegged stablecoin for Hong Kong at a finance forum event. Xiao emphasized that such a stablecoin could significantly benefit the offshore CNY market and enhance Hong Kong’s standing as an international financial center.
Xiao highlighted Hong Kong’s crucial role in promoting the Chinese yuan internationally, acting as the world’s largest offshore CNY business hub. He pointed out the innovative cross-border CNY products in the Greater Bay Area and emphasized Hong Kong’s history as a testing ground for financial advancements. With a strong institutional and market foundation, Hong Kong is well-equipped to trial new financial technologies with minimal barriers.
Xiao advocated for the development of a Greater Bay Area stablecoin linked to the Chinese yuan, based on regulated blockchains and digital smart contracts. He believed that such a stablecoin could elevate Hong Kong’s global financial status by leveraging its position as an experimental zone for CNY internationalization and offering novel boundary-less CNY products. Additionally, this initiative could help integrate the financial systems of Mainland China and the Hong Kong-Macau special economic zones.
One of the key benefits highlighted by Xiao was the stablecoin’s ability to create “firewalls” and “spare tires” to shield against potential systemic risks that could arise from a USD collapse, given the peg of the Hong Kong dollar to the US dollar. By balancing the USD-dominated international financial system and expanding the range of offshore CNY market products, the stablecoin could provide a safeguard against instability.
The introduction of a CNY-pegged stablecoin in Hong Kong holds significant potential for boosting the city’s financial standing, enhancing its role in the global financial sector, and safeguarding against systemic risks. By leveraging innovative technologies and integrating financial systems, Hong Kong could solidify its position as a key player in the ever-evolving financial landscape.