China-backed researchers call for establishing a pan-Asian digital currency to end US dollar dominance in the region, South China Morning Post report October 13th.
The economic conditions for creating a regional digital currency are now in place in East Asia, according to the report.
“More than two decades of deepening economic integration in East Asia have laid an excellent foundation for regional monetary cooperation.”
The proposed digital currency will be pegged to 13 currencies in the region, including the Chinese Yuan, Japanese Yen, and South Korean Won. Ten other Association of Southeast Asian Nations (ASEAN) member states will also join the alliance.
The researchers said that a digital currency could be built on distributed ledger technology so that no one country assumes control and cooperation is guaranteed.
But the main reason behind the proposal is to reduce the region’s reliance on the US dollar, which they argue will help ensure financial stability. Countries around the world are facing the problem of foreign exchange reserves due to US interest rate hikes.
On the other hand, this is not the first time that a country has proposed a community currency in Asia. Malaysian Prime Minister Mahathir Mohamad suggested it during his 1997 Asian economic crisis, and the Japan-led Asian Development Bank did the same in his 2006.
China’s digital yuan continues to grow
China is already piloting a digital yuan currency in 23 major cities. This is a time when other world powers are still considering the possibility of digital currencies.
China has seen an increase in the use of its own digital currency since its introduction in late 2021, and authorities have warned that transactions using the digital yuan reached 100 billion yuan (about $14 billion) at the end of August.
WSJMore It also reported earlier this year that Beijing and Saudi Arabia were discussing the possibility of using the yuan for some oil deals.