In mid-October, three Japanese scholars and advisors (Taiji Inui, Wataru Takahashi and Mamoru Ishida) published an article in VoxEU (a publication set up by the Centre for Economic Policy and Research, CEPR) in which they advocated the introduction of an Asian digital common currency covering the whole of the East Asia region as a multilateral synthetic currency comparable to the euro.
According to the authors, the benefits it would bring (deepening cooperation within multilateral frameworks and the protection of the rights of small and medium-sized countries, among others) would be greater than the disadvantages of inefficiencies in multilateral frameworks. The background for this research was the rise of Central Bank Digital Currencies (CBDCs) throughout the world, and more notably in Asia.
Even though this is just a suggestion made by the authors, which we do not know whether it will be put in practice or not, it is interesting to see that so much research is being conducted in Asia in the area of CBDCs. This is an area which offers indeed countless possibilities to China, as we are already seeing through the digital yuan tests in the Mainland (and soon in HK and Macau) and through the many possibilities, the RCEP trade agreement will offer to the cross-border deployment of the digital yuan.
In my latest articles, I have been writing quite often about China´s new Digital Yuan and its tests in the Greater Bay Area (GBA), most notably in Hong Kong and Macau. The Digital Yuan, which is China´s Central Bank Digital Currency (CBDC) and is also known as DCEP (Digital Currency Electronic Payment), offers indeed a myriad of opportunities to the whole of China and to the Greater Bay Area.
As I said, a Central Bank Digital Currency (CBDC) is a new form of Central Bank money accessible to the general public, accepted as a means of payment, legal tender, safe store of value by all citizens, businesses and government agencies.
China´s rationale behind its DCEP is multiple: monetary and social policy, technology and innovation, global geopolitics, financial crime prevention… Besides, we must not forget that CBDCs can be an effective tool when promoting financial inclusion, since they can address the needs of unbanked and underbanked people.