China comes up with yet another crypto-related plan to take on the hegemony of the U.S. dollar in international payments.
Chinese officials are reportedly planning to create an East Asia digital currency to assert more independence from the United States dollar and foster trade relations within the region.
According to a recent Nikkei Asia report, 10 members of the Chinese People’s Political Consultative Conference, the country’s top political advisory body, proposed creating a digital currency that would be backed by a basket of currencies including the Chinese yuan, Japanese yen, South Korean won and Hong Kong dollar. The article does not specify which blockchain the projected cryptocurrency would be based on.
The proposal was reportedly put forward by Neil Shen, co-founder of Chinese travel services giant Ctrip and the country’s top venture capital investor, as well as Henry Tang, a Hong Kong politician and former chief secretary, among other influential figures. As per the report, they suggested that the new regional cryptocurrency should be developed by the private sector.
The yuan and yen are expected to account for more than 60% and 20% of the digital currency’s value respectively, as the ratio will allegedly be calculated based on “the economic scale of the associated economies.”
The Nikkei Asia article mentions that the new idea could have been influenced by Libra’s decision to run a multi-currency coin called LBR, since apparently the Facebook-initiated cryptocurrency “seems no different from a digital dollar disguised as a currency basket” to China. It also notes that Libra has abandoned the idea to run a yen-pegged stablecoin, meaning that Japan seems likely to become involved with the East Asia digital currency.
The East Asia cryptocurrency also seems to fall in line with China’s intentions to create a payment network autonomous from the U.S. dollar, which remains the most popular medium for international business transactions.
There is still little detail on a Chinese central bank digital currency
Details about the digital yuan, a CBDC project run by the People’s Bank of China, remain scant. There is still no official launch date despite the pilot test being actively carried out in various locations including the cities of Shenzhen, Suzhou, Xiongan new area, Chengdu and the future site of the winter Olympics.
It is possible that the digital yuan will be accepted in other countries, although it is currently not clear whether that would overlap with the proposed East Asia cryptocurrency development. A recent article from South Korean news outlet Yonhap suggests that local merchants are ready to accept the digital yuan once the COVID-related travel restrictions lift and Chinese tourists start visiting their country again.