On May 21, Chinese officials proposed stablecoin in East Asia during a national session. The regional stablecoin will be backed by four major fiat currencies and facilitate trade between China , Korea and Japan.
A member of the Chinese People’s Political Consultative Conference Shen Nanpeng, who is also a global managing partner at Sequoia Capital, suggested regional cryptocurrency during Thursday’s national session. The crypto would be backed by major fiat currencies such as the Japanese yen, the Chinese yuan, the Hong Kong dollar, and the won Korean won.
East Asia stablecoin to cross-border transactions
The purpose of the proposed East Asia stablecoin is to ease trade and cross-border settlements in the East Asia region. Moreover, the digital currency would massively cut down the currency conversion expenses, reduce time taken to make cross-border settlements, and most importantly act as a litmus test for other state backed digital currencies.
Additionally, the east Asia stablecoin will also help in economic recovery efforts post coronavirus pandemic, by reviving trading activities as per the proposal. Although such digital currencies are not blockchain-based, they are similar to stablecoins such as Tether and USDC. Same as a stablecoin, a national cryptocurrency must maintain equality with the fiat they are pegged to.
Hong Kong recommended as ideal regional link
Furthermore, the digital currency proposal includes creating a regulatory sandbox and expand the system to Hong Kong as time goes; to refine cross border transactions within the region. The proposal recommends Hong Kong as the main financial entrance and links mainland China to the other countries in Asia. Per the proposal, 70 percent of trans-boundary renminbi transactions are processed there.
Hong Kong can make the ideal regulatory zone for the east Asia stablecoin. Hong Kong’s watchdog developed a licensing structure to regulate digital currency transactions and cryptocurrency trading platforms back in November 2019. Currently, the Hong Kong regulator has licensed 12 entities to operate in the metropolitan area.
