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A New Financial Reality

The release of Digital Yuan 2.0 in 2025 will change the way money works in Asia. This technology links the People’s Bank of China directly to the ASEAN cross-border payment network, which speeds up transactions compared to older systems like SWIFT, which take 3 to 5 days. Beijing is developing the groundwork of a regional financial infrastructure that speeds up transaction settlements while minimizing reliance on the US dollar.

Reports from Yuan Adoption Tracker say that in the first quarter of 2025, the Renminbi was used a lot more in international trade settlements, and its share of the global foreign currency market kept growing. This shows that the e-CNY project is not just a test in China, but also part of the country’s larger plan to make its currency more global.

This push for growth is also in line with the global trend of de-dollarization. China is using the competition between its economy and the US to spread the use of e-CNY across Asia. Experts say that 2025 will be a key year for the digital yuan to become more powerful outside of China, notably in Hong Kong’s retail sector and beyond ASEAN borders.

The Digital Yuan raises a strategic problem for ASEAN: should they prioritize transaction efficiency or monetary sovereignty? On the one hand, integrating e-CNY is cheap and fast. Beijing’s control over cross-border payment systems, on the other hand, could limit ASEAN central banks’ policy options. The fact that Thailand is involved in the m-CBDC initiative, Indonesia is involved with Rupiah Digital, and Vietnam is focused on regulating crypto in its own country shows that the region is not the same in how it reacts to Chinese financial technology entering its markets.

China’s Strategic Intent

Since its 2020 inception, Beijing has never limited e-CNY to local innovation. ASEAN trade aggressively promotes the digital Yuan as a cross-border payment method. The China Crunch analysis found that ASEAN e-CNY transactions exceeded 500 billion yuan in the first three quarters of 2025. This suggests that e-CNY is becoming a popular SWIFT alternative.

China views the US dollar’s dominance as a political weakness. Beijing is creating an alternative financial system by making e-CNY more popular. This will reduce global dollar dependence, which Russia and other BRICS countries want. Observer Research Foundation predicts that e-CNY will aggressively spread internationally in 2025, particularly in Hong Kong’s retail sector and beyond ASEAN.

Digital Yuan boosts soft power and speeds up transactions. Beijing becomes a rule-maker by adding ASEAN to e-CNY. China gains political leverage because ASEAN countries that use the e-CNY will find it tougher to oppose Beijing’s economic and diplomatic aims.

China is advancing the Multiple Central Bank Digital Currency Bridge (mBridge) project with Hong Kong, Thailand, and the UAE. This experiment tests how rapidly e-CNY can be utilized for cross-border transactions and improves regional financial strength. Beijing is utilizing mBridge to provide technology and create a new financial system to replace the West.

ASEAN’s Dilemma

The initiative is handled differently by each ASEAN nation. Thailand hopes to cut cross-border money transfer costs and strengthen financial integration. Indonesia made only the Rupiah Digital legal for digital payments. Clear goal: retain rupiah independence and prevent foreign currency takeover. Vietnam is regulating crypto more internally. According to PwC, Vietnam views crypto as an investment tool, rather than a payment method. Singapore’s latest project, BLOOM, uses tokenization and stablecoins to enable cross-border payments, maintaining system flexibility and preventing the dominance of a single currency. This suggests that several Southeast Asian countries are eyeing the growth of e-CNY.

Adding e-CNY may constrain ASEAN central banks’ policy options. If not regulated, cross-border CBDCs might cause capital flight and monetary instability, according to the IMF. Transaction efficiency may cost domestic stability through loss of influence. If ASEAN approves the e-CNY, the system would be more efficient and cost-effective, but more dependent on Beijing. If ASEAN rejects e-CNY integration, it would maintain monetary sovereignty but risk falling behind in global financial innovation.

Long-Term Risk for ASEAN

The digital yuan in ASEAN’s cross-border payment system could complicate monetary policy decisions. Each country’s central bank, which previously regulated liquidity and monetary instruments, will face new challenges when many cross-border transactions rely on the e-CNY.

Weaker economies in ASEAN, such as Timor-Leste, Laos, and Cambodia, that trade substantially with China will lose the ability to adjust their fiscal and monetary policies. The Digital Yuan is a data-driven payment system. China’s financial system may log all e-CNY cross-border transactions. The Atlantic Council CBDC Tracker notes that the e-CNY helps Chinese regulators track cash movements in real time. Others worry that Beijing could use financial data to influence politics, such as pressuring ASEAN countries that don’t support its strategic aims.

People desire to use e-CNY because it simplifies cross-border transactions, but widespread use could lead to structural reliance. ASEAN countries that overrely on China’s payment system will struggle to diversify their trade and maintain financial independence. E-CNY’s quick expansion in Hong Kong’s retail sector and beyond ASEAN boundaries by 2025 suggests that Beijing wants the Renminbi to be the region’s most significant currency. Beijing’s payment structure makes it difficult for countries to reject China’s diplomatic and investment offers.

Policy Implication

ASEAN needs to develop the Digital Payment Hub as a framework for regional integration. This will reduce the risk of single-party dominance of the e-CNY while strengthening interoperability between central banks. Cross-border coordination in CBDC development can prevent fragmentation of the global payment system and maintain regional monetary stability.

Digital Yuan carries financial surveillance risks. ASEAN must strengthen related regulations, Know Your Customer (KYC), Anti-Money Laundering (AML), and Countering Financing of Terrorism (CFT). Strong regulation of fintech and CBDC is necessary to protect state sovereignty from excessive external influence.

Indonesia, with Rupiah Digital, and Vietnam, with domestic crypto regulations, show that a hedging strategy can maintain monetary policy space. ASEAN needs to encourage each country to develop a domestic digital currency as a bulwark against external domination. Small countries can maintain policy space by developing alternative monetary instruments that strengthen financial sovereignty.

Finally, ASEAN must act as a collective bloc in international forums such as the G20 and the IMF to negotiate global CBDC standards. This will strengthen ASEAN’s bargaining position in the face of payment system dominance from major powers. Regional coordination in the face of global pressure is key to maintaining economic stability and national security.

Conclusion

The digital yuan has evolved from a mere financial innovation into a geopolitical instrument challenging the global monetary architecture. Its presence in Southeast Asia places ASEAN in a strategic dilemma: accept the cross-border transaction efficiencies offered by Beijing or maintain monetary sovereignty by developing a regional alternative.

The long-term risks that arise cannot be ignored. The integration of e-CNY has the potential to narrow policy space central bank, opening up opportunities for financial surveillance by Beijing, and creating structural dependencies that undermine the political and economic autonomy of ASEAN countries. The fragmentation of responses between countries further increases the region’s vulnerability to single-party domination.

Therefore, ASEAN needs to assert its collective position through the development of a regional CBDC framework, diversification of financial partners, strengthening regulations, and coordination in global forums. Without concrete steps, the region risks becoming an arena for great power competition, rather than an actor capable of determining the direction of the regional financial future.