The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on the value of several international currencies – currently the US dollar, euro, yen and pound sterling. China is keen to have the yuan included in the basket, and a decision is due at the end of this month.
In a column in the Chinese state-backed Shanghai Securities News, Yao told China News that an eSDR would help to address flaws in the current global monetary system.
Yao said that the current system did not reflect the rise of emerging markets, and that the supply of an international reserve currency should be detached from the economic policies of any particular country, Reuters reported.
"We think the issuance of, and continuous improvement in eSDR can help establish a new cross-border payment and settlement system using a super-sovereign currency, thus easing flaws in the traditional monetary system," Yao said, according to Reuters.
Beijing-based finance and investment expert Helena Chen of Pinsent Masons, the law firm behind Out-Law.com said: "Digital currencies and digital payments will become mainstream sooner or later. In China it is now very common to shop and pay online or to pay using mobile phones for food, clothes, goods, or to order a taxi. Technology is changing our lives."
The role of the SDR should also be expanded, Yao said, to include a settlement system between the SDR and other currencies, and the use of the SDR in global trades, financial transactions and commodities pricing, Reuters reported.
The basket should also include the currencies of all major economies, with gross domestic product used to calculate currency weightings, Yao said, according to Reuters.
Christine Lagarde, chief of the MIF has said that she supports the inclusion of the Chinese currency in the SDR basket. She will chair a meeting of the IMF’s Executive Board to consider the issue on November 30, she said.