Experts from an economic institute in China have circulated the idea of creating a blockchain-powered digital currency that could lower Asia’s reliance on the greenback. This initiative is being launched against the background of a growing digital currency pilot and recent cross-border payments made with digital currencies issued by the state in the region.
China: China Mints an Asia-Wide Digital Yuan.
Chinese government researchers have proposed the introduction of a new digital currency in Asia in order to reduce the region’s dependence on the U.S. fiat money. According to the South China Morning Post, this common coin could also be used to strengthen regional monetary cooperation and financial stability.
Song Shuang and Liu Dongmin of the Institute of World Economics and Politics of China Academy of Social Sciences said that the digital token would be linked to a basket of 13 currencies which includes the Chinese yuan and Japanese yen and South Korean won as well the ASEAN and Association of Southeast Asian Nations (ASEAN) member countries.
Weighting for each could be similar to that of the International Monetary Fund’s special drawing rights that serve as an international reserve asset, the report details. To support the currency, distributed ledger technology might be used. This would prevent any country from dominating the currency.
“More than 20 years of deepened economic integration in East Asia has laid a good foundation for regional currency cooperation. The conditions for setting up the Asian yuan have gradually formed,” the researchers wrote in an article published in August by the World Affairs journal — an edition affiliated with the Chinese Ministry of Foreign Affairs — and then posted online in late September.
China may lead the new Asian digital currency projects if it wins support
This isn’t the first initiative to create a regional currency in Asia. Other examples include the proposal of Malaysian Prime Minister Mahathir Mohamad made during the 1997 Asian financial crisis, which he repeated in 2019, as well as the Japan-led Asian Development Bank’s project for an Asian Currency Unit (ACU) from 2006.
The latest initiative, if realized, is likely to be led by China, which is currently the world’s second-largest economy and is constantly expanding the pilot area for its own sovereign digital currency, the digital yuan. The People’s Bank of China (PBOC) recently announced that e-CNY payments had surpassed 100 billion yuan (almost $14 billion) in 360 million transactions by the end of August.
Although the Chinese government maintains that its central bank digital currency (CBDC) is primarily intended for domestic use — about two dozen major cities participate in the testing with over 5.6 million merchants accepting the coin — the PBOC is also exploring cross-border settlements, together with the monetary authorities of Hong Kong, Thailand, and the United Arab Emirates.
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