Malaysia and China are exploring the establishment of an Asian Monetary Fund to reduce their reliance on the U.S. dollar and the International Monetary Fund (IMF) for trade. This move follows a trend of Asian nations striving to reduce their dependence on the U.S. dollar.
A Bold Approach For Malaysia
On April 4, Malaysian Prime Minister Anwar Ibrahim stated that China was receptive to discussing the creation of an Asian Monetary Fund. The idea emerged during a forum held in the Chinese island province of Hainan last week, as reported by Bloomberg.
Ibrahim revealed that China’s President Xi Jinping supported discussions on a proposed agency to assist Malaysia, China, and other regional countries in reducing their dependence on the U.S. dollar and the IMF.
As part of these efforts, Malaysia’s central bank collaborates with the People’s Bank of China to conduct trade in their respective currencies. In late March, China and Brazil announced a similar agreement to transact exclusively in their national currencies, eliminating the need for U.S. dollars.
The concept of an Asian Monetary Fund was initially proposed in the 1990s. Still, Ibrahim believes the time is ripe for its establishment, given the strength of the economies in China, Japan, and other Asian nations. He suggested that the idea should be discussed and the use of their respective currencies be considered.
More Global Rumblings
A Russian state official recently mentioned a new currency for the BRICS alliance in related news, encompassing Brazil, Russia, India, China, and South Africa. This initiative is also aimed at reducing reliance on the U.S. dollar.
In October 2022, Chinese government researchers proposed a digital currency based on a basket of Asian currencies. Meanwhile, Alex Lo, a South China Morning Post columnist, suggested on April 4 that countries may wish to distance themselves from the U.S. dollar for reasons beyond economic considerations, including avoiding the “gangsterism of U.S. foreign policy.”
The potential decline of the U.S. dollar as the world’s reserve currency could significantly impact its value relative to other currencies and crypto assets.
This shift may also have a knock-on effect on the $133 billion stablecoin market, which is currently dominated by dollar-pegged stablecoins.