According to an article published in the Nikkei Asian Review on Sunday, a private-sector led plan to create a pan-Asian digital currency to rival Facebook’s cryptocurrency Libra, and challenge the supremacy of the dollar now have the backing of Beijing,
The proposed pan-Asian digital currency would be based on a basket of currencies including the Chinese yuan, Japanese yen, South Korean won and Hong Kong dollar.
The scheme—unveiled at a high-level political advisory meeting, the Chinese People’s Political Consultative Conference (CPPCC,) on May 21—would create an East Asia digital currency, based on a basket of Asian currencies: the Chinese yuan, Japanese yen, South Korean won and Hong Kong dollar.
The result would be a cross-border digital currency with China’s soon-to-be launched “digital yuan,” or DCEP, at its core; the ratios of the currencies in the basket would be determined by the economic scale of their associated economies.
Such a payment network could support the free trade agreement being negotiated by Japan, China and South Korea, creating a trade zone independent of the dollar, analysts told Nikkei.
“Japan does not reject [being chosen as a single-currency Libra] but promoters of the initiative probably consider the yen unattractive, as the chances of its use in cross-border transactions are low,” a Japanese financial official told Nikkei, in reference to the yen’s exclusion.
Japan’s own trials for the mutual use of private digital currencies and electronic payment systems are well underway, with major banks and the monetary authorities participating in various schemes, said the publication. But Japan fears evolutionary isolation—developing a digital currency that no one will use. Thus, the prospect of joining China’s scheme may not be unattractive.
Its plans were galvanized last year by the announcement of Libra, which was originally pegged to a basket of fiat currencies, since amended to stablecoins. Centred on the dollar, it’s viewed in China as little different from a digital dollar.
Incorporating the digital yuan in an East Asia digital currency scheme would give the currency broader internationalization. Analysts suggest that China is open to a public sector-led intuitive to achieve its ambitions.
The plan has the backing of influential political and business figures, such as Neil Shen, co-founder of Chinese travel services provider Ctrip. It suggests that “earnest deliberations on the regional digital currency scheme are well underway in China,” according to Nikkei.