Tuesday, June 6, 2023

ASEAN Finance Ministers and Central Banks Consider Dropping US Dollar, Euro and Yen in favour of local currencies

ASEAN Finance Ministers and Central Bank Governors are meeting to discuss reducing dependence on major global currencies in favour of local currencies for financial transactions.

The Local Currency Transaction scheme is an extension of the Local Currency Settlement scheme that is being tested between ASEAN member countries. The introduction of a cross-border digital payment system based on local currencies would allow the states in ASEAN to trade in local currencies. President Widodo of Indonesia has encouraged regional administrations to use credit cards issued by local banks and discard foreign payment systems, in order to protect transactions from geopolitical repercussions. The move away from Western payment systems comes ahead of a pending ASEAN currency trade decision and foreign investors should be mindful of the amount of major currencies they hold in accounts.

The Association of Southeast Asian Nations (ASEAN) is an intergovernmental organization comprised of 10 countries in Southeast Asia. Recently, the ASEAN Finance Ministers and Central Banks have been discussing the possibility of dropping the US dollar, Euro and Yen as their main currencies and instead use a basket of currencies or a digital currency as their settlement unit. Additionally, Indonesia has been calling for phasing out Visa and Mastercard, two of the world’s most popular credit card networks, within the region.

The move away from the US dollar, Euro and Yen follows concerns about the stability of these currencies. The global economy has been experiencing volatility in recent years and the value of these currencies has been fluctuating dramatically. ASEAN member countries are looking for a more stable and predictable settlement unit to use for international trade.

One option being discussed is a basket of currencies. A basket of currencies is a weighted average of a group of currencies. By using a basket, the impact of currency fluctuations can be reduced because the value of the basket is based on a group of currencies rather than just one.

Another option is the use of digital currencies. Digital currencies are virtual currencies that operate on a decentralized network. One example of a digital currency is Bitcoin. While not yet widely used, digital currencies are becoming more mainstream and are already being used in some countries.

Regardless of the option chosen, the move away from the US dollar, Euro and Yen will have significant implications for global trade. These currencies are some of the most widely used in international trade and the shift away from them will likely lead to changes in the way goods and services are bought and sold.

In addition to the discussion about currencies, Indonesia has also been calling for the phasing out of Visa and Mastercard within the ASEAN region. Indonesia’s central bank has already rolled out a national payment gateway and has been urging other ASEAN member countries to follow its lead.

The phasing out of Visa and Mastercard would mean that consumers would have to use local payment systems when making purchases in the ASEAN region. This would encourage the growth of local payment systems and reduce reliance on foreign payment networks.

In conclusion, the ASEAN Finance Ministers and Central Banks are considering dropping the US dollar, Euro and Yen as their main currencies and instead using a basket of currencies or a digital currency as their settlement unit. Indonesia is also calling for the phasing out of Visa and Mastercard within the region. These changes would have significant implications for global trade and would encourage the growth of local payment systems.

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