The proposal unveiled Thursday describes the currency as a “stablecoin,” a term for cryptocurrencies designed to hold their value and backed by a reserve currency, although it does not explicitly mention crypto or blockchains.
The People’s Bank of China (PBOC) would lead the proposed effort. The basket of underlying collateral would follow the special drawing rights (SDR) model of the International Monetary Fund (IMF), where each country’s currency is assigned a different weight based on its economy.
The proposed stablecoin would help facilitate trade among the four countries, which is key to economic recovery in the region after coronavirus, its proponents said. It would do so by improving cross-border settlement and clearing services with a new payment network and digital wallet for enterprises.
Neil Shen, founding and managing partner of Sequoia China and a member of China’s upper house, presented the proposal to Chinese legislators during the Two Sessions, the country’s largest annual political gathering.
Nine other advisers who are also upper house members, 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-signed the proposal.
Shen attended the first session of the Chinese People’s Political Consultative Conference (PCC) on Thursday. The PCC is essentially an advisory upper house where a range of organizations and independent members help the government make national-level decisions. This meeting will be followed by plenary sessions of the National People’s Congress (NPC) starting Friday and lasting for about two weeks.
Proposals out of the PCC do not tend to have the same level of influence as the more concrete bills discussed in the NPC because the bills will yield significant changes in laws and regulations. However, in this case the proposal might have some sticking power.
The stablecoin proposal also suggests creating a regulatory sandbox and scaling up the system in Hong Kong over time to improve cross-border payment services between the four countries.
Led and supervised by The People’s Bank of China (PBOC), companies from private sectors would launch the stablecoin and develop the project with the latest financial technologies. Enterprise users would be able to store the coins in a digital wallet and deposit cash at a custodian as reserves to back their stablecoins, according to the proposal.
The Hong Kong Monetary Authority and The People’s Bank of China (PBOC) can create a framework to regulate the stablecoin’s cross-border transactions, manage risks and discourage money laundering, the proposal said.
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