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The Rise of Digital Hong Kong Dollar: Opportunities and Challenges of the New Web3 Anchor Currency
The Development Prospects of Digital Hong Kong Dollar and Its Impact on Web3
The Hong Kong government issued a policy declaration regarding the development of virtual assets in Hong Kong last October and will officially launch the application process for virtual asset service provider (VASP) licenses on June 1 of this year. The Hong Kong Monetary Authority has also announced the second round of the digital Hong Kong dollar pilot program. Hong Kong is accelerating the construction of infrastructure and legal environments, and traditional financial practitioners are actively arming themselves in hopes of entering the new financial track of Web3 more quickly.
Today's guest speaker is James XYC, the core developer of MapProtocol. MapProtocol is a permissionless cross-chain infrastructure protocol, similar to open-source organizations like the Android Foundation in the traditional computing industry. James himself is a Forbes 2023 Blockchain Innovator and a recipient of the Hong Kong Quality Migrant Admission Scheme.
1. The Development Prospects of Digital Hong Kong Dollar
The digital Hong Kong dollar is expected to address the issue of insufficient reserve funds in Hong Kong. Currently, the liquidity of the Hong Kong dollar has encountered problems leading to a shortage of reserves, but if the digital Hong Kong dollar can be realized, there will be tremendous circulation in the Web3 industry. It is estimated that within 5 years, the Web3 market size may exceed that of Hong Kong stocks. If Hong Kong can establish the digital Hong Kong dollar as a legal and anchored digital currency in the Web3 world, the business opportunities will be immeasurable.
A survey shows that 58% of respondents are willing to use Digital HKD as a substitute for USDC and USDT, reflecting the confidence and expectations of the majority in Digital HKD and the development of Web3 in Hong Kong.
2. Characteristics and Advantages of Digital Hong Kong Dollar
Digital Hong Kong dollar is very important to the new financial system. Compared with traditional account opening models, the digital Hong Kong dollar is borderless, and anyone can generate an address to enter the market circulation. This brings more possibilities, such as operating globally or even on Mars.
In the foreseeable future, fiat digital currencies will continue to be an anchor for Web3, and people will need a measure of value to assess their returns in the Web3 world.
Compared to other stablecoins, the Digital Hong Kong Dollar has the following advantages:
3. The Application Prospects of Digital Hong Kong Dollar
Possible application areas of digital Hong Kong dollars include:
4. Issuance and Technical Implementation of Digital Hong Kong Dollar
Digital Hong Kong dollars may first be issued on private chains or consortium chains, but ultimately need to be issued on a public chain to improve circulation efficiency and scope. The issuance process does not require modifications to the existing market system, similar to how banks issue exchange certificates on the chain.
In terms of security, the backing of authoritative banks allows for the quick locking of hacker addresses, reducing the risk of theft. In terms of compliance, the primary market requires KYC, but the circulation in the secondary market is not controlled.
Full-chain issuance can adopt the method of directly issuing tokens on each chain, achieving cross-chain interoperability through smart contracts. MapProtocol can provide advanced non-privileged role cross-chain data interoperability technology to ensure security.
5. Potential Risks
6. Introduction to MapProtocol
MapProtocol is an open-source cross-chain protocol that operates through a token incentive model. Based on MapProtocol, the team has also developed commercial products such as Butter, which provide full-chain payment and any currency exchange services.
Overall, the development of the digital Hong Kong dollar will bring new opportunities to Hong Kong's financial industry and will also have a significant impact on the global Web3 ecosystem. Banks and financial institutions need to actively embrace this transformation, but they must also be aware of the associated risks and challenges.