Among Central Asian countries, 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, the country has demonstrated its readiness for crypto adoption by launching the national crypto bank and incorporating blockchain technology into its banking system, digital payments, and financial regulations, among other activities.
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The upcoming gold-backed, government-supported stablecoin Gold Dollar, or USDKG, also proves the point. Advisers William Campbell and Gabriel Guerra detailed this initiative during Cointelegraph’s recent AMA.
State-endorsed but market-driven
Unlike other stablecoins, USDKG is a 1:1 USD pegged, gold-backed stablecoin that is directly supported by the Ministry of Finance of the Kyrgyz Republic. Compared to CBDCs, which typically go through a lengthy legal and economic process, USDKG 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 continued. “When you talk about stablecoins, they usually have trust issues, especially with some of the collateral. But that’s not the case with USDKG.“
The speakers clearly outline the role of the state 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 clarified.
Unlike traditional financial systems where governments simply declare their holdings, USDKG will provide real-time proof-of-reserves with onchain verification available soon after launch. “Because the gold is on the blockchain, we can actually verify that it is there, which means full transparency,“ added Guerra.
Plan for digital economy
USDKG will initially launch on Ethereum, with 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.
The Kyrgyz stablecoin is positioned as a solution for cross-border payments, as remittances account for approximately 30% of the country’s GDP. By integrating into the financial ecosystem, USDKG enables instant, 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 USDKG because it stores value and is also convenient for everyday use. Whether it’s shopping, peer-to-peer transactions or long-term savings, USDKG can serve multiple purposes.
The first step in integrating the USDKG 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.
USDKG will also be listed on global crypto exchanges, allowing for lending, borrowing, yield farming and more. A triple redemption option for users will be possible, according to Campbell: “Anyone holding USDKG can redeem it for physical gold in Kyrgyzstan, exchange it for crypto like USDT, or withdraw it as fiat through the traditional banking system.“
Speakers also see the stablecoin helping to position Kyrgyzstan as 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.“
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