China, poised to roll out its potentially game-changing digital yuan, is leading the way in development of bitcoin-like digital currencies.
Governments around the world are scrambling to keep up with the changing nature of money, kicked off bitcoin a little over a decade ago and turbo-charged by Facebook just last year, provoking an outburst from U.S. president Donald Trump.
Now, an influential group in China has revealed plans for an East Asia cryptocurrency scheme that could see a basket of currencies combined to take on bitcoin, Facebook's libra and even the U.S. dollar—as Trump is wrestling with the looming effects of a coronavirus-induced recession.
President Donald Trump has reignited the U.S.-China trade war in recent weeks, while some have ... [+]
Proposals for a bitcoin-inspired East Asia cryptocurrency scheme that would include the Chinese yuan, Japanese yen, South Korean won and Hong Kong dollar were put forward this month at a meeting of the Chinese People's Political Consultative Conference, a political advisory body.
The plans, put together by 10 members of the advisory body, drew attention due to the participation of notable figures such as the co-founder of Chinese travel services provider Ctrip and venture capital investor, Neil Shen, and Henry Tang, Hong Kong's former chief secretary, according to a Nikkei Asian Review report.
The regional cryptocurrency is expected to be backed by all four currencies but weighted to their economic scale, with China’s yuan and Japan's yen accounting for 60% and 20% respectively.
It's thought the scheme will create a cross-border payment network to ease international trade at a time when U.S.-China relations are deteriorating and the U.S. using its dollar dominance to sanction adversarial countries.
The proposals come as China begins trialling payments in its new digital currency across four major cities, local media reported at the end of April.
Other countries around the world, including Norway, Sweden and Japan, are all working on digitalizing their own currencies.
China's plans for an East Asia cryptocurrency scheme that could rival bitcoin, Facebook's libra, and ... [+]
China's rapid expansion of its digital currency program has led to urgent calls for the U.S. to speed up development of a digital dollar.
However, regulator intervention in Facebook's planned libra digital currency means it could eventually function effectively as a digital dollar equivalent.
Facebook's Libra Association, a group organized by the social media giant to manage the digital currency, unveiled revised plans in April that will see it issue separate coins backed by individual fiat currencies such as the dollar and euro.
Meanwhile, highlighting the challenge Donald Trump and the U.S. Federal Reserve faces, some currency analysts have begun to question whether the dollar will be able to maintain its position as the world's dominant reserve currency.
"In the face of Washington’s poorly timed wish for financial decoupling from China, who will fund the saving deficit of a nation that has finally lost its exorbitant privilege," asked Stephen Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, in a Bloomberg op-ed.
"Like Covid-19 and racial turmoil, the fall of the almighty dollar will cast global economic leadership of a saving-short U.S. economy in a very harsh light."
