Bank Of Japan: Central Bank Digital Currencies Could Destabilize Existing Financial System

Udgivet den by Cointele | Udgivet den

The Bank of Japan's deputy governor spoke negatively about the effects of central bank-issued digital currencies on the current financial system in closing remarks at a fintech conference, published yesterday, April 16.

In his remarks, Deputy Governor Masayoshi Amamiya stated that while central bank-issued digital currencies could have a negative impact on the current financial system, the bank is open in the future to applying emerging economical technologies like crypto.

The conference was held jointly by the International Monetary Fund, Japan's Financial Services Agency, and the Bank of Japan.

The Deputy Governor spoke about the previous challenges for international financial authorities, i.e. the global financial crisis in 2008, which was a time when "Crypto-currencies [sic] had not yet appeared." With the arrival of this new innovation, Amamiya notes that CBDCs are now "Stimulat[ing] global discussion on to what extent central banks should provide their payment and settlement infrastructures to society."

"The issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks' financial intermediation."

"To sum up, IT innovation raises many fundamental questions and challenges related to the currency system, the design of central bank infrastructure and the utilization of information attached to economic activities."

Amamiya concludes that although the Bank of Japan will not be issuing its own virtual currency right now, the bank understands that the application of emerging technologies is always a possibility for central bank infrastructure.

The Bank of Japan and the European Central Bank are currently working on a joint initiative, Project Stella, researching Blockchain's potential use for securities settlements.

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