(Kitco News) - Researchers at a Chinese state-run think tank have proposed creating a pan-Asian digital currency with the goal of reducing the economic region’s reliance on the U.S. dollar.
The proposal was put forth in the September issue of the World Affairs journal by researchers Liu Dongmin, Song Shuang and Zhou Xuezhi, who work at the Institute of World Economics and Politics under the Chinese Academy of Social Sciences. (CASS).
The idea for an Asia-wide token comes as Beijing is looking to consolidate its economic influence in the region and establish itself as a global leader in the digital currency arena.
“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,” said the researchers.
The trio has suggested that distributed ledger technology would underpin the currency as a way to prevent the dominance of any one country and remove any obstacles to regional monetary cooperation.
The “Asian yuan” token would be pegged to a basket of 13 currencies, including the yuan, Japanese yen, and South Korean won, along with those of the ten member countries in the Association of Southeast Asian Nations (ASEAN).
The researchers recommended that the weight of each currency in the basket be similar to that of the International Monetary Fund’s special drawing rights (SDR).
The team advised that a common Asian digital currency is needed to lower the region’s reliance on the U.S. dollar and help safeguard financial stability, specifically pointing to the recent market volatility brought about by aggressive U.S. rate hikes.
“East Asian countries have long settled their trade in the U.S. dollar, exacerbating currency mismatches and exchange rate risks. It was the trigger for the 1997 Asian financial crisis,” they said.
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The researchers recommended that a department be created under the Asean+3 Macroeconomic Research Office (AMRO) – a Singapore-based macroeconomic surveillance organization headed by Chinese national Li Kouqing – to coordinate the creation of an Asian yuan. Eventually, it would be upgraded to the Asian Monetary Fund.
It is anticipated that China will lead the way in pushing for an “Asian yuan” as the world's second-largest economy is currently leading the pack when it comes to the development and testing of its central bank digital currency (CBDC), the e-CNY.
Recently, the country expanded its e-CNY trial to four additional provinces, which joined 23 major cities in utilizing the CBDC, primarily for small retail payments. Stats show that at the end of August, a total of 5.6 million merchants were accepting the e-CNY and the system has processed 100 billion yuan (US$13.9 billion) worth of transactions.
