China is proposing a stablecoin that would be rolled out in China, Japan, Korea and Hong Kong, to help improve trade between East Asian countries.
The proposed, stablecoin would be backed by the fiat currencies of the countries involved, China, Hong Kong, Japan and Korea. The plan would bring the four countries into closer economic alignment. Most importantly, it would encourage stronger trade links, as well as facilitating pre-existing arrangements.
The plan itself was suggested by Shen Nanpeng, a Global Managing Partner at Sequoia Capital.
It is Nanpeng’s belief that the proposed stablecoin would slipstream the movement of goods and services between the countries, which are already at a high volume and could potentially save the trading bloc vast amounts of money and time.
By introducing a stablecoin that is backed by each of the countries own fiat currencies, cross border transfers could be much easier as the cost to both send and receive money would be reduced — settlement times could also see a decrease. In addition, the process for exports and imports would be simplified, as seen in Eurozone countries.
The wider eventual goal for these improvements is that they could help revive the post coronavirus economy more quickly. This would be achieved through the higher degree of facilitation for businesses in moving money and goods, around their more immediate global environment.
Nanpeng has also stated that one of the aims for the project is to provide a test run for China’s own central bank digital currency (CBDC), which has been in the works since 2017. The project would be integrated with the CBDC when it does eventually in full force.
It is important to remember that China’s CBDC is still in its early stages. However, it does seem to follow the trend with other countries, such as Sweden and Ukraine, who are also working on their own CBDCs.
South Korea, one of the proposed countries for the East Asian stablecoin, has been conducting research into the CBDC projects of other nations. This could well mean that South Korea will be more disposed to become a part of the project. In much the same way that China is looking to use this project as a test run for their own CBDC, so too could South Korea.