Following the signing of the Regional Comprehensive Economic Partnership (RCEP), markets are abuzz as to how the free trade agreement covering 15 Asia-Pacific countries can be taken to the next stage.

At this year’s Singapore Fintech Festival (SFF), a panel discussed the possibility of setting up a regional digital currency in 10 to 15 years. 

With the pandemic and geopolitical uncertainties, countries tend to focus on their own affairs. But Zhou Wei, managing partner at CCV Capital, stresses the need for more cooperation. "We want the world to be flatter. At least in this region, we should make things more smooth, benefiting each other," he tells the SFF panel.

“RCEP is just a 1.0 partnership, RCFP, the Regional Comprehensive Financial Partnership, should be 2.0 version, and the RDC, which stands for the regional digital currency, will be the outcome and the innovation of the RCFP,” says David Ye, co-founder, chairman and chief executive officer of Rong360, a financial services app of Chinese fintech firm Jianpu Technology Inc.

Ye thinks there are three pillars to support the development of a digital currency: consumer or user demand, technology, and the regulatory framework. The first two pillars are already in place, but there are some critical issues at the regulatory level, he notes.

“In this digitalized age, there is definitely a strong need in terms of digital currency from a regional perspective,” Ye says, sharing his experience travelling in Southeast Asia when he had to carry at least five of six currencies in his wallet. “This is just crazy. I think in 10 or 15 years, at least among the SEA countries or the RCEP member-countries, we will have a regional digital currency.”

China tests

The current technology is ready for the launch of such currency. “All the technology solutions and the providers are there. The DCEP (digital currency electronic payment), the digital currency by the People’s Bank of China, is already there,” he explains. 

China is proceeding with beta tests for the DCEP in several cities across the country. Regulators ran the first test in Shenzhen by issuing DCEP coupons in the form of digital red pockets to city residents in October, and a new round of tests kicks off this month in Suzhou, a second-tier city in the west of Shanghai. 

Like in Shenzhen, residents in Suzhou can enter a lucky draw held by the local government in which 100,000 digital red packets each containing 200 yuan (US$30) will be given away.

This round of test allows more banks to participate; there are altogether six Chinese banks involved. Also, JD.com, one of China’s e-commerce giants, has announced that they will also participate in this round of test, enabling Suzhou residents to purchase from their website using DCEP red packets. 

These are all part of the central bank’s efforts to press ahead with the DCEP. 

Launching a regional digital currency requires the involvement of all the regulators from the participating countries. “That’s a lot of work to do,” Ye admits, but he remains upbeat.

But whether the currency should be renminbi-denominated, given that China is ahead of the curve in this area, Ye thinks this is less important.