Kyrgyzstan plans to launch a gold-backed USDKG stablecoin pegged to the US Dollar at a 1:1 ratio in the third quarter.
The stablecoin, which will be backed by the Kyrgyz Ministry of Finance with $500 million worth of gold, aims to facilitate cross-border transfers in Kyrgyzstan, where remittances play a significant role in the economy. These transfers, which account for 30% of the country's gross domestic product (GDP), could significantly increase the use case for USDKG. The ministry aims to raise its gold reserves to $2 billion, ensuring the security and transparency of collateral through independent audits.
Gold has long been regarded as a liquid, risk-free store of value. However, occasional price fluctuations may pose a risk to the stability of the stablecoin. To mitigate this risk, it is stated that the stablecoin will be over-collateralized.
Gabriel Guerra, the project's advisor, stated that the main use case for the stablecoin would be cross-border transactions and international trade, particularly in Central Asia. Future expansion plans include Southeast Asia and the Middle East.
It was emphasized that USDKG is not intended to track gold prices and will not depreciate like stablecoins such as USDT or PAXG. Instead, USDKG will be exclusively backed by gold reserves and traded at a 1:1 ratio with the US dollar. Thus, it will maintain a stable value directly linked to the US Dollar, the global reserve currency. Holders of USDKG will be able to exchange their stablecoins for physical gold or other crypto assets or withdraw them as fiat currency.
