Bank of Japan (BoJ), the country’s central banking authority, currently has no plans to issue a central bank digital currency (CBDC), citing financial stability concerns.
In a closing remark at a conference with the International Monetary Fund and Japan’s Financial Services Agency on Monday, the BoJ’s deputy governor Masayoshi Amamiya said issuing a digital currency directly for consumers – whether or not on a blockchain – could undermine the existing two-tiered system.
Currently central banks only give access to limited entities such as private banks, which face consumers directly in a second tier – a process that Amamiya praises as “the wisdom of human beings in history to achieve both efficiency and stability in the currency system.”
As such the deputy governor moved on explaining that having a digital currency backed by the central bank will change the system without proving to be financially stable.
“In this regard, 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.”
That said, Amamiya does not entirely rule out the possibility of considering the bank’s own cryptocurrency in the future as it has already started looking into the underlying blockchain technology, though currently just for business applications.
As reported before, through a partnership with the European Central Bank, the BoJ has kicked off an initiative called Project Stella, which has recently published research results on how the distributed ledger technology can create new securities settlement mechanisms.
Bank of Japan image via Shutterstock