Policy makers in China have proposed creating a common digital currency for Japan, China, South Korea and Hong Kong that would work in a manner not very similar to FacebookOriginal plan for the Libra project.
Per Seoul Daily, 10 members of the National People’s Congress – the largest and most powerful policymaking body in China, have proposed creating a token that would be linked to a basket of four currencies, namely the Chinese yuan, Japanese yen, South Korean won and the Hong Kong dollar. The token would help the nations abolish dollar-based cash deals, something Beijing is said to be very excited about.
The lead architect of the proposal is Neil Shen, founder of Sequoia Capital and travel agency Ctrip. Henry Tang Ying-yen, the Chief Secretary of Hong Kong between 2007 and 2011 and the Financial Secretary from 2003 to 2007, was cited as another key supporter.
The same news report claims that Japanese sources believe that policymakers suggested that each country store part of the “basket” in their own currency, with mainland China asking to cough up 60% of its total basket holdings in RMB. Japan would be asked to rise around 20% in yen.
Political tensions in the region could prove to be a major obstacle to such an enterprise, with trade between all four parties suffering in recent years, mainly due to geopolitical and local disputes.
Trade officials, however, were keen that the nations cast aside their disagreements for the sake of business – particularly in the wake of the coronavirus pandemic, which has already hit the economies of East Asia.
Seoul Daily cites a Nikkei report stating that China was prompted to act by the White Paper on Libra, which it initially viewed as a de facto digital dollar. This has led Beijing to step up its own digital yuan project – now in pilot tests – and at least it could consider the idea of creating an East Asian trade record.
As previously reported, other international trading partner groups, including the BRICS countries (Brazil, Russia, India, China and South Africa), have explored the idea of creating cryptocurrencies or digital tokens specifically to facilitate international trading.