Fearing the hegemony of the US dollar, China proposes to create a single Asian cryptocurrency. The digital token will be linked to a basket of 13 currencies, including the yuan, Japanese yen, South Korean won and the currencies of 10 ASEAN countries.
Government researchers said that a common Asian digital currency would reduce the region's dependence on the US dollar and help maintain financial stability.
Prerequisites for the creation of a single Asian digital currency
Chinese government researchers believe that the conditions are suitable for the creation of a pan-Asian digital currency, which can improve regional monetary cooperation and reduce dependence on the US dollar.
The idea of a pan-Asian digital token arose when Beijing was trying to strengthen its economic influence in the region and its position as a world leader in the development of digital currencies. China is also working hard to reduce its dependence on the US dollar system amid threats of a financial rupture from Washington.
"More than 20 years of deepening economic integration in East Asia have laid a good foundation for regional monetary cooperation. The conditions for the creation of the Asian yuan have gradually formed," said researchers Song Shuang, Liu Dongmin and Zhou Xuezhi from the Institute of World Economy and Politics of the Chinese Academy of Social Sciences.
What will be the Asian cryptocurrency?
The digital token will be linked to a basket of 13 currencies, including the yuan, Japanese yen, South Korean won and the currencies of 10 member countries of the Association of Southeast Asian Nations (ASEA N), the researchers write in the article.
The share of each of them may be similar to the share of special drawing rights of the International Monetary Fund, an international reserve asset. Distributed ledger technology will support the currency, preventing the dominance of any one country and removing obstacles to regional monetary cooperation.
Why do we need a single Asian cryptocurrency?
Government researchers said that a common Asian digital currency would reduce the region's dependence on the US dollar and help maintain financial stability.
They pointed to the volatility of the financial market caused by aggressive rate hikes in the United States, which negatively affected the foreign exchange reserves of Asian countries.
"East Asian countries have been trading in US dollars for a long time, which exacerbates currency inconsistencies and exchange rate risks. This was the trigger of the 1997 Asian financial crisis," they said.
This is not the first time a super-sovereign currency has been used for Asia. Former Malaysian Prime Minister Mahathir Mohamad proposed the introduction of a single currency in East Asia to replace the US dollar during the 1997 Asian financial crisis and again insisted on its need in 2019.
In 2006, the Asian Development Bank, led by Japan, also proposed an Asian monetary unit, although it was eventually shelved.
The proposed Asian cryptocurrency is likely to be led by China, which is the second largest economy in the world and has conducted extensive tests of its sovereign digital currency, known as e-CNY.
China has tested its central bank digital currency in 23 major cities, mainly for small retail payments, and by the end of August it was accepted by 5.6 million sellers, and total transactions amounted to 100 billion yuan (13.9 billion US dollars).
No timetable has been set for the launch of e-CNY, but China is far ahead of its neighbors, Japan and South Korea, neither of which has published detailed plans for their central banks' digital currencies.
