An economic institute in China has suggested the creation of a blockchain-powered digital currency to reduce Asia’s dependence on the greenback. This initiative is being launched against the backdrop of a growing virtual yuan pilot and recent cross-border payments made with digital currencies issued by the state in the region.
China suggests that it will mint an Asia-Wide Digital Yuan, supported by Distributed Ledger Technology
Researchers from China have suggested that a new digital currency be introduced in Asia to decrease the region’s dependency on U.S. dollars. They claim that the common coin would help to safeguard financial stability and enhance regional monetary cooperation.
Song Shuang, Liu Dongmin and Zhou Xuezhi, from the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said that the digital token would be tied to a basket of 13 currencies including the Chinese yuan and Japanese yen, South Korean won and the 10 members of ASEAN, The Association of Southeast Asian Nations.
The report details that the weighting of each currency could be comparable to that of the International Monetary Fund’s special drawing rights, which serve as an international reserve asset.
The proposed currency could be underpinned by distributed ledger technology. This would prevent any country from dominating the currency.
“Over 20 years of East Asia’s economic integration has provided a solid foundation for currency cooperation. In an August article by the World Affairs journal, an edition associated with the Chinese Ministry of Foreign Affairs, the researchers stated that the conditions have been gradually created for the establishment of the Asian Yuan. The article was then published online in September.
China is likely to lead a new Asian digital currency project if it gains support
This isn’t the first attempt to create a regional currency for Asia. Another example is the proposal by Mahathir Mohamad, the Malaysian Prime Minister, during the 1997 Asian financial crises. He repeated it in 2019 as well as the project of the Japan-led Asian Development Bank for an Asian Currency Unit ( CU ) which was launched in 2006.
China is expected to lead the initiative if it is realized. China is currently the second-largest economy in the world and is expanding its pilot area for its sovereign digital currency, the digital yuan. The People’s Bank of China recently announced that eCNY payments had surpassed 100 Billion Yuan (almost 14 billion) in 360 Million transactions by August.
The Chinese government claims that the central bank’s digital currency ( CBDC ) is intended for domestic use. More than 6,000 merchants accept the coin in testing. However, the PBOC is also exploring cross border settlements with the monetary authorities from Hong Kong, Thailand and the United Arab Emirates.