Amid the ongoing global CBDCs adoption, China proposes an Asian-wide digital currency to reduce the continent’s economic reliance on the US dollar.
USD is unquestionably the most widely used international currency. The International Monetary Policy is also based on the US dollar. Many countries’ economies rely on the USD for international trade and exchange, while other currencies are USD-pegged.
Research shows the Asian region relies heavily on USD for international transactions at the expense of their local currencies. It reflects the inability to get financed in their local currencies.
China, South Korea, and to some extent, Japan, which are the most developed countries in Asia, also rely on USD. The dollar-dominant international finance renders economies vulnerable to spill-over effects from the United States.
This economic vulnerability is what China seeks to eliminate with the introduction of the Asian yuan token. According to Chinese researchers, the Asian yuan token, an Asian-wide digital currency, is aimed to reduce the Asian USD dependence on international businesses.
Asian Yuan Token Will Peg To 13 ASEAN Member Countries’ Currencies
Cryptocurrencies and USD are widespread among South East Asians for remittances, currency inflation hedges, and international business.
Researchers Liu Dongmin, Song Shuang, and Zhou Xuezhi of the Chinese Academy of Social Sciences (CASS) published their views in a September Issue of the World Affairs Journal. The Researchers said an Asian yuan token would reduce Asia’s USD reliance.
Like the CBDCs, the researchers think a distributed ledger technology (DLT) would back the Asian token. The token would peg to 13 currencies, which includes currencies of 10 Association of Southeast Asian Nations (ASEAN) member nations. The other three currencies that would form the token peg are the Chinese yuan, Japanese yen, and South Korean won.
As written in the journal, over 20 years long economic integration in East Asia laid a foundation for regional currency cooperation. The researchers believe that conditions are ripe for setting up the Asian yuan token. The South China Morning online post shared the published issue on October 10.
The researchers are members of the Institute of World Economics and Politics, a research unit under CASS that affiliates with the World Affairs Journal. The World Affairs Journal also affiliates with China’s Foreign Affairs department.
CBDC Pilot Of China Hits A Milestone
Meanwhile, China’s CBDC pilot hit a milestone a few weeks after the Asian yuan token research publication. On October 10, the Bank of China said its e-CNY pilot transacted approximately $14 billion (100 billion yuan). It further revealed that nearly 5.6 million merchant stores support the digital yuan.
The Chinese central bank, with Thai, UAE, and Hong Kong central banks, are also part of the Inthanon-LionROCK multi-jurisdiction cross-border payment CBDC pilot. In September, the Bank for International Settlements (BIS) announced the successful completion of the pilot for the cross-border payment CBDC.
Cryptocurrency market goes up on the chart | Source: Crypto Total Market Cap on TradingView.com
The announcement revealed over $22 million in transactions within one month on the BIS Multi CBDC Bridge platform.
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