A growing number of nations are looking to develop digital versions of their currencies, and now there might be regional initiatives taking shape to target the U.S. dollar’s supremacy on the global stage.
For instance, Nikkei Asian Review recently reported that Chinese officials are mulling developing an “East Asia digital currency” in what might be a new front in the race among nations to issue fiat rendered in bits and bytes.
The publication said China would back the new digital currency with a basket consisting of the Chinese yuan, Japanese yen, Hong Kong dollar and the South Korean won. The yuan and yen are likely to account for about 60 percent and 20 percent, respectively, of the digital currency’s value.
The plan also calls for establishing a “cross-border payment network” that would use digital wallets tied to a free-trade agreement negotiated by Japan, China and South Korea, Nikkei Asian Review said. The publication said the entire proposal came from 10 members of the Chinese People’s Political Consultative Conference.
The idea of creating a digital coin backed by a basket of multiple currencies isn’t actually new. Consider the fact that when Facebook first proposed its Libra digital currency, plans initially called for backing it with a basket of currencies such as the U.S. dollar and the European Union’s euro.
Meanwhile, European Central Bank (ECB) board member Yves Mersch said at a recent virtual conference that about 80 percent of 66 central banks queried by the Bank of International Settlements were already working on central bank digital currencies (CBDC).
Mersch said a retail CBDC could be based on deposit accounts opened with a central bank.
“Though involving vast numbers of accounts, it would not be a particularly innovative option from a technological viewpoint,” he said. “For the euro area, it would basically mean increasing the number of current deposit accounts offered from around 10,000 to between 300 million and 500 million.”
The ECB member said such a currency “would enable the central bank to register transfers between users, thereby providing protection against money laundering and other illicit uses (or those considered illicit by the rulers of the day), depending on the degree of privacy granted to users.”
China has already progressed on efforts to launch a digital yuan. Starbucks and roughly 19 other companies are already trying out the currency through a pilot program launched by the People’s Bank of China.
It seems, then, that battle lines of sorts are being drawn around digital currencies. They’re no longer just country by country initiatives (or central bank by central bank ones). Instead, they’re now coalescing into potential regional projects.