Experts from an economic institute in China have floated the idea of creating a blockchain-powered digital currency that could reduce Asia’s dependence on the dollar. The initiative comes against the backdrop of a sprawling digital yuan pilot and after recent tests of cross-border payments with state-issued digital currencies in the region.
China Suggests Minting Digital Yuan Across Asia Backed by Distributed Ledger Technology
Chinese government researchers have proposed the introduction of a new digital currency in Asia to reduce the region’s dependence on US fiat money. The common currency would also help safeguard financial stability while enhancing regional monetary cooperation, they say, quoted by the South China Morning Post this week.
According to Song Shuang, Liu Dongmin, and Zhou Xuezhi of the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, the digital token would be pegged to a basket of 13 currencies, including the Chinese yuan, Japanese yen, South Korean won, and those of the 10 members of ASEAN, the Association of Southeast Asian Nations.
The weighting of 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. Distributed ledger technology could be employed to support the proposed currency. Such an approach would aim to avoid dominance by any one of the participating countries.
“More than 20 years of deeper economic integration in East Asia have laid a good foundation for regional monetary cooperation. The conditions for establishing the Asian yuan have gradually formed,” the researchers wrote in an article published in August by World Affairs magazine, an edition affiliated with China’s Foreign Ministry, and then published online in late September.
China is likely to lead a new Asian digital currency project if it gains support
This is not the first initiative to create a regional currency in Asia. Other examples include Malaysian Prime Minister Mahathir Mohamad’s proposal made during the 1997 Asian financial crisis, which he repeated in 2019, as well as the Japanese-led Asian Development Bank project for an Asian Currency Unit (ACU) from 2006. .
The latest initiative, if realized, will likely be led by China, which is currently the second largest economy in the world 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 exceeded 100 billion yuan (nearly $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 are participating in the tests with more than 5.6 million merchants accepting the currency), the PBOC is also exploring cross-border agreements, together. with the monetary authorities of Hong Kong, Thailand and the United Arab Emirates.
Do you think the Chinese proposal for an Asian digital currency will receive enough support in the region? Share your thoughts on the matter in the comments section below.
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