Kyrgyzstan stands out for its proactive approach to crypto and blockchain

Since the 2022 Law “On Virtual Assets,“ which established a clear legal framework for crypto activities

Kyrgyzstan is quickly becoming a leader in crypto and blockchain integration, and its upcoming gold-backed stablecoin, Gold Dollar (USD/KG), is a testament to this initiative.

At the same time, the initiative is also highlighting the role of private companies and individuals in driving the project.

Advisers William Campbell and Gabriel Guerra discussed this initiative further during Cointelegraph’s recent Ask Me Anything (AMA) session.

Unlike other stablecoins, USD/KG is a 1:1 USD pegged, gold-backed stablecoin that is also directly supported by the Ministry of Finance of the Kyrgyz Republic.

Compared to central bank digital currencies (CBDCs), which usually undergo a lengthy legal and economic process, USD/KG is expected to have a much faster impact.

“The non-CBDC approach gives the free market more dynamics. If it were a CBDC, it would control the supply, the minting, the burning, and the people using it would be under government control,” Guerra said.

“In fact, most Web3 users find CBDCs too strict and privacy-invasive,” Campbell added. “When you talk about stablecoins, they usually have trust issues, especially with some of the collateral. But that’s not the case with USD/KG.”

The speakers further elaborated on the roles of the state and private companies in the project.

“The role of the Kyrgyz Ministry of Finance ends with the supply of gold reserves. The rest – development, auditing and maintenance – is done by private companies and individuals,” Campbell explained.

Unlike traditional financial systems where governments simply declare their holdings, USD/KG will provide real-time proof-of-reserves with onchain verification expected to be available shortly after launch.

“Because the gold is on the blockchain, we can actually verify that it is there, which means full transparency,” Guerra noted.

Initially launching on Ethereum, USD/KG plans to expand to other chains as adoption grows.

“We’re creating an international asset, and the long-term vision is to compete with major stablecoins like USDC and USDT,” Campbell said.

Positioned as a solution for cross-border payments, especially considering that remittances account for approximately 30% of the country’s GDP, the Kyrgyz stablecoin will be able to facilitate instant and low-cost international transactions, making it easier for workers abroad to send money home.

“This also opens the doors for global adoption,” said Guerra. “We offer an ideal asset for both institutions and individual investors, as they can trust USD/KG because it stores value and is also convenient for everyday use. Whether it’s shopping, peer-to-peer transactions or long-term savings, USD/KG can serve multiple purposes.”

The first step in integrating the USD/KG into the local financial system will be to connect it to Kyrgyz banks and institutions and make it legal tender in the country.

Once this foundation is in place, expansion into other Central Asian markets will follow.

“The Central Asian market is definitely the target, but there’s also interest in Southeast Asia and the Middle East, where gold backing has significant economic and cultural value,” Guerra said.

The stablecoin will also be listed on global crypto exchanges, enabling lending, borrowing, yield farming and more. A triple redemption option for users will be possible, according to Campbell.

“Anyone holding USD/KG will be able to redeem it for physical gold in Kyrgyzstan, exchange it for crypto like USDT, or withdraw it as fiat through the traditional banking system.”

The speakers also noted that the stablecoin could help Kyrgyzstan become a hub for Web3 businesses.

“You launch this financial ecosystem backed by solid gold, and you invite people to participate,” Campbell said. “Then, with all the regulations they’re building, Web3 companies may decide to set up operations in Kyrgyzstan and take advantage of the new financial landscape.”