Adopting Cryptocurrency Would Come with Many Compromises for Japan, But Regulation is Necessary
- Central banks in Japan do not want to issue digital currencies.
- The deputy governor of the Bank of Japan states that adopting digital currency would force banks to get rid of cash.
The debate on allowing cryptocurrency to be used within Japan has been interesting, to say the least. While the nation has been capitalizing on the benefits that blockchain technology can offer, cryptocurrency has been a vastly different story.
According to news reports with the Bank of Japan (BoJ), central bank digital currencies will not be used, due to the potential requirement for the country to eliminate cash.
A report from Reuters shared that deputy governor Masayoshi Amamiya of the Japanese central bank stated that any digital platform operator would ultimately need to follow the regulations on money laundering and risk management. When the conversation turned to Facebook’s new digital asset, the deputy governor stated:
“As for Libra, we must bear in mind that the potential global user-base could be enormous.”
Ultimately, the bigger concern for the country is the way that central bank digital currencies could ultimately “erode commercial banks’ credit channels,” creating an unnecessary negative impact on the rest of the economy.
During the discussion with Reuters, Amamiya brushed off the concept of issuing digital currencies as a way of increasing the efficacy of negative interest rate policies.
By imposing negative interest rates on central bank digital currencies, the deputy governor believes that households and even companies would end up siding with cash instead, avoiding the risk of being charged. Amamiya explained:
“To overcome the nominal zero lower bound, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”
Last year in April, Amamiya commented that there were no plans of the central bank to issue digital currencies for their customers, based on the potential financial instability it could create. He added that the existing two-tiered system would also be undermined.
Presently, only limited entities have access to central banks, like private banks, which then deal with customers directly. With the launch of a digital currency, the system would be completely changed, without evidence that it could remain stable.
Clearly, Japan would rather remain on the safe side for now, even if it means that they are not a part of the innovation that is cryptocurrency.