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The Kyrgyz Ministry of Finance will back the stablecoin with $500 million in gold, with plans to expand reserves to $2 billion.

What you need to know:

Kyrgyzstan plans to launch the gold dollar (USDKG), a gold-backed stablecoin pegged to the US dollar, in the third quarter.

The Kyrgyz Ministry of Finance will support the stablecoin with $500 million in gold, with plans to expand reserves to $2 billion.

USDKG is designed for cross-border transactions and international trade, initially focusing on Central Asia, with future expansion into Southeast Asia and the Middle East.

Kyrgyzstan, a Central Asian country, plans to launch the gold dollar, or USDKG, a gold-backed stablecoin pegged 1:1 to the US dollar in the third quarter, according to project advisor Gabriel Guerra at the Token2049 conference in Dubai.

The stablecoin, backed by $500 million in gold from the Kyrgyz Ministry of Finance, is designed to facilitate seamless cross-border transfers in a country where remittances represent 30% of GDP.

The ministry aims to expand gold reserves to up to $2 billion, with plans for independent audits to ensure trust and transparency in the supporting guarantees.

Gold has long been considered a highly liquid and risk-free store of value. However, occasional price fluctuations pose a potential risk to the stability of the stablecoin.

To mitigate this impact, Guerra noted that the stablecoin will be more secured, adding that its primary use will be capital transfer across borders.

Guerra said, "The stablecoin will be used in cross-border transactions and international trade, initially focusing on Central Asia and planned expansion into Southeast Asia and the Middle East later."

It is worth noting that USDKG is not intended to track gold prices like USDT or PAXG. Instead, it will be backed solely by gold reserves and will be issued and redeemed on a 1:1 basis with the US dollar, maintaining its value stability directly tied to the widely used global reserve fiat currency in international trade.

Holders of USDKG can exchange their stablecoins for physical gold and other crypto assets or withdraw them as fiat currency.

Omkar Godbole is an associate editor on the CoinDesk Markets team, based in Mumbai, and holds a master’s degree in finance. He is a certified market technician (CMT). Omkar previously worked at FXStreet, where he wrote research on currency markets and served as a fundamental analyst in the currency and commodities department of financial brokerage firms in Mumbai. Omkar holds small amounts of Bitcoin, Ethereum, BitTorrent, Tron, and DOT.

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