- Chinese officials plan to create a stablecoin backed by a basket of Asian digital currencies.
• The currencies involved are the Japanese yen, Korean won, Chinese yuan, and the Hong Kong dollar.
• This effort is separate from the People’s Bank of China’s central bank digital currency.
Chinese officials proposed a regional stable coin backed by four major Asian currencies. The proposed digital currency is meant to stimulate trade between China, Japan, and Korea.
A Cross-Border Currency
Shen Nanpeng, a member of the Chinese People’s Political Consultative Conferencel, proposed the digital currency during a national session on Thursday, May 21.
The stablecoin would be backed by a basket of currencies, including the Japanese yen, Korean won, Chinese yuan, and Hong Kong dollar.
Though the currencies are not explicitly built on a blockchain, nor are they technically a cryptocurrency, digital currencies of this type are often compared to stablecoins such as Tether and USDC. Like stablecoins, a national digital currency maintains price parity with its backing.
Purpose of the Stablecoin
The proposed stablecoin is meant to facilitate cross-border transactions in the region. The proposal would reduce currency conversion costs, improve transaction settlement times, and serve as a test case for other national digital currencies. The stablecoin will also assist with economic recovery in the aftermath of the COVID-19 crisis by stimulating trade, said the proposal.
China’s Other Efforts
This currency appears to be distinct from China’s central bank digital currency (CDBC), which has been under development since 2017. Efforts to create a CDBC are led by the People’s Bank of China, which is only mentioned as a potential supervisor and collaborator for the regional stablecoin.
The report considers this basket of currencies a “test case” for China’s CDBC and notes that the stablecoin would be “seamlessly connected” to the CDBC. In any case, it will take time to develop the new digital currency.
In the initial stages, the groups responsible will test the stablecoin in a regulatory sandbox, build-out a custody system, and improve cooperation between Hong Kong and the Chinese mainland.