Many developing and developed countries across the globe are considering or already developing and testing their own central bank digital currencies (CBDCs). China might be creating an East Asia virtual currency platform, according to a report from the Nikkei Asian Review.
The new currency might compete with the Facebook-led Libra stablecoin and even the US dollar, which remains the global reserve currency.
Last month, Asian officials reportedly proposed a plan to issue a digital currency that would consist of the Chinese yuan, Japanese yen, South Korean won, and the Hong Kong dollar. The suggestion to issue the virtual currency was made by 10 members of a political advisory group that attended the Chinese People’s Political Consultative Conference.
The members included billionaire Neil Shen, co-founder at Ctrip, a major Chinese travel services provider,
Henry Tang, a Hong Kong politician and former chief secretary of the city-state, is also part of the political advisory group that recommended issuing a virtual currency backed by major Asian fiat currencies.
The CPPCC, which consists of leaders from several major business sectors, is held on the sidelines of the National People’s Congress (the national legislature).
The People’s Bank of China (PBoC), the nation’s reserve bank, has been testing the virtual yuan in Shenzhen and four other locations in mainland China.
The 10 members said that the private sector in China should also support the development of a CBDC.
The regional digital currency’s value will be backed by the Chinese renminbi (60%), Japanese yen (20%), South Korean won (percentage not determined yet), and the Hong Kong dollar (percentage not determined yet).
The proposal recommends creating a cross-border payment network through which companies will be able to conduct transactions via digital or online wallets. This type of network should help expand global trade as it could potentially lower the risks associated with foreign exchange volatility.
Notably, the Japanese yen was one of the five major world currencies that the Libra project was planning to use for its global payments system.
However, the yen was dropped from Libra’s updated plan which may support the Singapore dollar, Euro, and the British pound (and the USD of course).