The Central Asian country Kyrgyzstan plans to launch a gold-backed stablecoin 'USDKG' in the third quarter. An advisor to the project recently revealed this plan at a digital asset event in Dubai.
USDKG will be initially backed by gold worth $500 million, with a goal to expand the collateral to $2 billion. With gold prices rising 25% since the beginning of the year, the Kyrgyzstan government intends to over-collateralize the stablecoin considering market volatility. They also announced plans to conduct regular external audits to ensure trust in the currency.
The government aims to solve high-cost international remittance issues through this stablecoin. In 2024, Kyrgyzstan received total remittances of $3 billion, with over 90% or $2.7 billion coming from Russia. Remittance fees average 8%, significantly higher than the global average (6.6%) or UN recommended standard (3%).
Kyrgyzstan expects to reduce remittance fees, improve financial accessibility, and establish a more convenient transfer ecosystem compared to traditional banking systems through USDKG.
Notably, this national stablecoin will enter practical use before China's central bank digital currency (CBDC) 'Digital Som'. While the People's Bank of China developed a demo version last year and is preparing legal amendments, no significant progress has been announced since.
Gold-backed USDKG is expected to be a key component of Kyrgyzstan's digital financial infrastructure strategy. The project is evaluated as an important turning point to reduce financial burdens for citizens and accelerate the country's digital economic transformation.
