Kyrgyzstan Bets Big on Gold-Backed Crypto: $2B Reserve Target for USDKG Stablecoin

Central Asia’s crypto play heats up as Kyrgyzstan unveils USDKG—a gold-pegged dollar stablecoin aiming for fortress-like reserves. Move over Tether, there’s a new gold-standard sheriff in town.

The National Bank of Kyrgyzstan isn’t just dipping toes in digital assets—it’s building a bullion-backed battleship. With $2 billion in reserves targeted, this could become the most heavily backed stablecoin since... well, ever.

Gold bugs meet crypto bros: USDKG’s 1:1 gold-to-coin ratio makes El Salvador’s Bitcoin play look like pocket change. Though skeptics whisper about the irony of using blockchain to recreate the gold standard—the very system crypto was meant to disrupt.

One thing’s certain: while Wall Street debates tokenized RWAs, Kyrgyzstan just built a digital Fort Knox. Take that, fiat purists.

The Kyrgyzstan stablecoin will be backed by gold

Kyrgyzstan is attempting to position itself as an innovator in the Central Asian digital finance market with the planned launch of its USDKG.

The USDKG is a gold-backed stablecoin pegged to the U.S. dollar.

According to the project advisor, Gabriel Guerra, the Ministry of Finance will begin the project with $500M worth of gold in reserve and intends to grow that to $2B over time. The project aims to combine the reliability of gold with the accessibility of blockchain-powered finance.

The Gold Dollar (USDKG) is set to debut in the third quarter of 2025, as revealed by Guerra at the Token2049 conference in Dubai.

The launch of the USDKG is part of the Kyrgyz government’s plan to modernize the country’s financial infrastructure and improve international money movement, with the Kyrgyz Ministry of Finance leading the plan.

“This stablecoin will be used in cross-border transactions and international trade,” Guerra explained. He added that the initial rollout will target Central Asia before they explore expanding into Southeast Asia and the Middle East.

30% of Kyrgyzstan’s GDP comes from remittances. A serviceable USDKG could ease overseas transfers if it offers a faster, cheaper, and more stable alternative to traditional remittance channels.

Guerra emphasized the potential for USDKG to address the inefficiencies in cross-border transactions, which would help both individuals and businesses avoid the costly processes of current banking systems.

Reserves will be overcollateralized

Unlike some digital assets like Paxos Gold (PAXG) or Tether Gold (XAUT), which track the real-time price of gold, USDKG is not designed to mirror the fluctuations of the gold market.

Rather than track the price of gold, the USDKG is backed by physical gold reserves and maintains a stable value through its direct tie to the U.S. dollar.

This design helps to shield users from any volatility in gold’s price. By maintaining a 1:1 redemption ratio with the U.S dollar, the stablecoin will preserve purchasing power and reduce price fluctuations.

To further secure the value of the stablecoin and build public confidence, the project will also be overcollateralized. This means that the value of gold held in reserve will exceed the amount of USDKG issued. This safety measure further protects users in case of sudden gold price dips.

Additionally, the reserves will undergo independent audits, and transparency will be central to the stablecoin’s operations.

Stablecoin holders can redeem their tokens for physical gold, other cryptocurrencies, or fiat currencies.

This flexibility gives the USDKG a potential edge in both traditional finance and emerging crypto economies. Traders looking for an asset-backed by a trusted commodity with the ease of blockchain movement may find the USDKG especially appealing. Governments and institutions in regions where gold is culturally and economically valued, such as the Middle East, may find it easy to integrate the stablecoin into their economies.

Also, Guerra did not rule out the USDKG stablecoin’s availability on centralized and decentralized exchanges, which would facilitate accessibility for institutional and retail investors.

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