- Chinese legislators and political advisors proposed for a pan-Asian digital asset.
- This initiative would improve cross-border settlement and clearing services for businesses using a payment network and digital wallet.
- The currencies backing the digital stablecoin would include the Japanese yen, Korean won, Hong Kong dollar and the yuan.
With global trade increasing, cross-border payments require smoother processes. This was the main subject of discussion for various Chinese officials who proposed a regional pan-Asian digital currency.
In the midst of various political dignitaries, member of the National Committee of the Chinese People’s Political Consultative Conference and Sequoia Capital Global Shen Nanpeng submitted a “Proposal on Cross-Border Digital Stable Currency in Hong Kong” wherein he said that convenient cross-border trade payment and settlement services will “promote economic and trade cooperation between China, Japan and South Korea.” He stressed that making payment remittance smoother is critical because “trade is a key link to boost the economy after the epidemic.”
As negotiations between China-Japan-Korea accelerate, convenient cross-border trade payment and settlement services will promote economic and trade cooperation in the region, Nanpeng added. The proposal suggested a potential currency as a “stablecoin” or commonly deemed as cryptocurrencies backed by a reserve or fiat currency.
Echoing a similar sentiment, the former president of the Hong Kong Monetary Authority, Chen Delin proposed that to help trade in Asia a China-Japan-South Korea-Hong Kong digital stable currency composed of RMB, Japanese yen, South Korean won, and Hong Kong dollar must be established and a cross-border payment settlement network and enterprise electronic wallet system should be developed.
Building on the benefits of a regional digital stablecoin, Nanpeng pointed out three advantages. He said it will help “reduce the exchange rate risk of cross-border trading companies,” adding that the digital stable currency would rely on a robust exchange rate system to further “enhance the exchange rate stability of the digital stable currency and its applicability and appeal to cross-border trading companies.”
Secondly, it will help “improve the efficiency of the cross-border payment settlement system,” Nanpeng said. At the moment, cross-border payments have a high handling fees along with slow payment processes, and complicated procedures.
A regional digital currency coupled with the use of electronic wallets operating on technologies such as blockchain and cloud computing will enable corporate companies in boosting their business revenue and improving transparency. As a result, business users would be able to store the stablecoins in an electronic wallet and deposit cash at a custodian as reserves to back their stablecoins, the proposal said.
Thirdly, a regional stable coin will “provide test scenarios for cross-border applications of central bank DC / EP,” Nanpeng said, adding that:
“the central bank and the Hong Kong Monetary Authority conduct joint research on governance, regulations and supporting measures such as cross-border capital flow and trade information records, anti-money laundering risk management and control in the context of blockchain and digital stable currency.”
Detailing on the advantages of the project which would be led by the People’s Bank of China (PBOC) Nanpeng said that:
“It is foreseeable that if China, Japan, South Korea and Hong Kong digital stable currencies can be implemented, it will enhance the anti-risk ability of regional trade under the influence of the international environment.”
Nine other advisers, including Kennedy Wong, a solicitor of the Supreme Court of Hong Kong, former chief secretary of Hong Kong Henry Tang and Hong Kong-based Chinese billionaire Songqiao Zhang, co-authored the proposal.
The stablecoin might be potentially launched before China’s national digital currency and conduct for proof of concept as well as identify risks and technical issues, if any. Once launched, the regional stablecoin could “seamlessly” be connected with the digital yuan.
Hong Kong deemed as an important connect for the stablecoin
The proposal added that given Hong Kong is one of the most important financial gateways connecting mainland China to the other Asian countries.
“Considering that about 70% of global RMB cross-border payments are processed by Hong Kong, it is reasonable and necessary to include Hong Kong in the digital stable currency cross-border payment system,” Nanpeng added.
In fact, the PBOC and the China Securities and Regulatory Commission recently came up with various new measures in a bid to improve the financial ecosystem in Guangdong-Hong Kong-Macao Greater Bay Area and pushed for blockchain applications as a key initiative.
Indeed, whether a regional Asian digital currency could lift the grim effects of the pandemic and boost business, is something time will tell.