China floats idea of ‘Asian yuan’ to reduce reliance on US dollar

The proposed distributed ledger technology-backed “Asian yuan” token would supposedly help reduce Asia’s dependence on the U.S. dollar for international business.

Researchers from a Chinese state-run think tank have floated the idea of an Asia-wide digital currency with the aim of reducing its reliance on a United States dollar-based economy. 

The views of researchers Liu Dongmin, Song Shuang and Zhou Xuezhi from a unit of the Chinese Academy of Social Sciences (CASS) were published in an issue of the World Affairs journal posted online in late September, who said the establishment of an Asian yuan token would lower Asia’s reliance on the USD.

Much like similar existing and trialed central bank digital currencies (CBDCs), the researchers said distributed ledger technology (DLT) would form the backing of the Asian token, which would be pegged to a bundle of 13 currencies.

The currencies would include those of all 10 of the member nations in the Association of Southeast Asian Nations (ASEAN) along with China’s yuan, Japan’s yen and South Korea’s won, according to the researchers.

“More than 20 years of deepened economic integration in East Asia has laid a good foundation for regional currency cooperation. The conditions for setting up the Asian yuan have gradually formed,” the researchers wrote in the journal seen by the South China Morning Post.

The journal is affiliated with China’s Foreign Affairs department, with the researchers hailing from the “Institute of World Economics and Politics” one of many research units under CASS, a think tank with various ties to the country’s ruling party.

The U.S dollar and, more recently, cryptocurrencies have become a popular method for those in South East Asia to conduct business, send remittances and hedge against the inflation of their respective local currencies.

Related: China accounts for 84% of all blockchain patent applications, but there's a catch

The research came a few weeks before a milestone in China’s CBDC pilot, the Bank of China on Oct. 10 said its e-CNY had transacted around $14 billion in value, or 100 billion yuan, with around 5.6 million merchant stores already supporting the digital yuan.

The country’s central bank is also partaking in Project Inthanon-LionRock, a DLT-backed cross-border payment CBDC trial also involving the ​​Thai, Hong Kong and United Arab Emirates central banks.

In September the trial saw the “successful” transaction of over $22 million worth of value in a month on its “Multiple CBDC Bridge” platform overseen by the Bank for International Settlements (BIS).