Integrating Networks for Regional Trade Agreements



Pindar Wong| Hinrich Foundation

Manufacturers in East Asia now have the option to settle trade under three major trade frameworks: the Regional Comprehensive Economic Partnership (RCEP), the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP) and the Indo-Pacific Economic Framework. Will they continue to use the US dollar as the de facto unit of account for financial settlements, or will they choose cryptocurrencies like Bitcoin, or Central Bank Digital Currencies (CBDCs) such as China’s e-CNY?

If life follows art, it is not hard to imagine a splintered world and political economy akin to George Orwell’s dystopia in 1984—a world divided into three global networks belonging to the states of Oceania, Eurasia and East Asia. In reality these could be divided by major CBDCs—a digital dollar, a digital euro and a digital yuan—with the digital ‘gold’ of Bitcoin perhaps serving as the currency for ‘disputed territories’. The Japanese art of joining broken bowls with gold, kintsugi, comes to mind.

In the early 2000s online and offline trade settlements were conducted using the US dollar, the world’s reserve currency, with online trade dependent on traditional financial settlement networks. Today however, there are different ways to settle online trade using units of account that are native to the internet. Since the invention of cryptocurrencies trade can be settled completely on-net—entirely on the internet—not via highly regulated offnet financial networks.

There are now over 19,000 cryptocurrencies. So far, these volatile and speculative units of account can be exchanged on over 500 digital exchanges. These exchanges enable conversion to other digital assets, such as non-fungible tokens—financial assets consisting of digital data stored in a blockchain—and stablecoin, less volatile units of account with prices linked to a commodity or fiat currency.

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