As the priority of distancing from US dollar dominance continues to rise in Asia, China, and Malaysia are reportedly discussing the possibility of establishing an Asian Monetary Fund. Malaysian Prime Minister Anwar Ibrahim stated on April 4 that China had shown openness to the proposal.
Bloomberg reported that the idea of an Asia-centric fund was recently presented at a forum held in the Hainan island province of China. Malaysian Prime Minister Ibrahim stated that China's President Xi Jinping was receptive to talks about the proposed agency that would help the two countries, and others in the region, reduce their reliance on the US dollar and the International Monetary Fund (IMF). In an effort to detach from the US dollar, Malaysia, among other Asian countries, is collaborating with China's central bank to conduct trade in their respective currencies.
Towards the end of March, China and Brazil agreed to conduct transactions exclusively in their respective currencies, eliminating the use of the US dollar.
While the concept of an Asian Monetary Fund was first considered in the 1990s, Ibrahim believes that the present is an opportune time to revisit the idea. He stated, "Now, with the strength of the economies in China, Japan, and others, I think we should discuss this — at least consider an Asian Monetary Fund, and, secondly, the use of our respective currencies."
As reported in late March that a Russian state official mentioned the possibility of a new currency for the BRICS alliance, which would incorporate the growing economies of Brazil, Russia, India, China, and South Africa as another step towards distancing from the US dollar. Chinese government researchers also suggested a digital currency based on a basket of Asian currencies in October 2022.
Additionally, on April 4, South China Morning Post Columnist Alex Lo speculated that other motivations could be behind the move to distance itself from the US dollar.
According to South China Morning Post Columnist Alex Lo, there may be other motivations beyond economic factors for countries to distance themselves from the US dollar, such as a desire to avoid the impact of US foreign policy. If the dollar were to lose its status as the world's reserve currency, it could significantly affect its value in comparison to other currencies and cryptocurrencies. Also, the $133 billion stablecoin market, which is largely composed of dollar-pegged stablecoins, could also be impacted.
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