China and Malaysia are exploring the possibility of setting up an Asian Monetary Fund, signaling a shift away from US dollar dominance in the region.
The move comes as several Asian nations are seeking to detach themselves from dollar dependence, including Malaysia, which is working with the People’s Bank of China to conduct trade in their own currencies.
An Asian Monetary Fund was initially considered in the 1990s, but Malaysia’s Prime Minister Anwar Ibrahim thinks now is the time, given the strength of the economies in China, Japan, and others.
The proposed fund aims to help the two nations, and others in the region, to distance themselves from the US dollar and the International Monetary Fund (IMF).
This development follows a recent agreement between China and Brazil to transact solely in their national currencies, cutting out the greenback entirely. Furthermore, a Russian state official spoke of a new currency for the BRICS alliance, which incorporates Brazil, Russia, India, China, and South Africa.
While economic reasons underpin the move to distance from the US dollar, other factors come into play. South China Morning Post Columnist Alex Lo says more countries want to move away from the US dollar “to escape the clutches of the gangsterism of US foreign policy, which in the past two decades has weaponized its global dollar dominance with increasing abandon.”
The end of the dollar as the world’s reserve currency could significantly impact its value compared to other currencies and crypto assets.
It could also have a knock-on effect on the $133 billion stablecoin market, which is dominated by dollar-pegged stablecoins.
In October 2022, Chinese government researchers proposed a digital currency based on a basket of Asian currencies, which could further contribute to the distancing from the US dollar in the region.