Malaysia enlists China to unplug its trade off the US dollar

By: Michael Wilson

April 5, 2023 6:22 AM

As Asia intensifies its efforts to remove itself from US dollar hegemony, more proposals and currency concepts emerge.

As the region seeks to distance itself from US currency hegemony, China and Malaysia are considering going forward with discussions about an Asian Monetary Fund.

Malaysian Prime Minister Anwar Ibrahim allegedly stated on April 4 that China was open to the establishment of an Asian Monetary Fund.

According to Bloomberg→, the idea for the Asian-focused fund was proposed at a gathering last week on the Chinese island province of Hainan.

According to Ibrahim, China's President Xi Jinping welcomed negotiations on a new organization to assist the two countries – and others in the area – in moving away from the currency and the International Monetary Fund (IMF).

Malaysia is one of several Asian countries attempting to wean itself off the dollar. The central bank is collaborating with China's People's Bank to conduct trade in their respective currencies.

China and Brazil decided in late March to conduct all transactions in their respective currencies, eliminating the use of the US dollar entirely.

An Asian Monetary Fund was first considered in the 1990s, but Ibrahim believes that now is the moment, stating:

"Today, with the strength of China's, Japan's, and others' economies, I believe we should examine this — at the very least, explore an Asian Monetary Fund, and, secondly, the usage of our various currencies."

According to Cointelegraph, a Russian state source also mentioned a new currency for the BRICS alliance in late March. It would be yet another attempt to break away from the dollar, embracing the expanding economies of Brazil, Russia, India, China, and South Africa.

Chinese government academics proposed a digital currency based on a basket of Asian currencies in October 2022.

On April 4, South China Morning Post columnist Alex Lo speculated→ that there could be further factors behind the dollar's depreciation.

According to Lo, more countries desire to ditch the US dollar not only for economic reasons, but also to "escape the grips of the gangsterism of US foreign policy, which has militarized its global dollar domination with greater abandon in the last two decades."

The dollar's demise as the world's reserve currency might have a significant influence on its value in comparison to other currencies and digital assets. That might have an impact on the $133 billion stablecoin market, which is dominated by stablecoins pegged to the US dollar.