With finance ministers and central bank governors having recently discussed cryptocurrency regulations at the G-20 summit, Japan is taking notice at home. Leaders at the Bank of Japan (BOJ), Ministry of Finance (MOF), and Financial Services Agency (FSA) have held a number of meetings to determine whether the country should become next in line to adopt a government-sanctioned digital currency, Cointelegraph reported.
The issues under discussion include how the Japanese government embracing a central bank digital currency (CBDC) would impact the world economy. Despite the rise of numerous crypto exchanges, the US dollar continues to be the de facto global currency.
As the birthplace of cryptocurrency, Japan has often been ahead of the global pack when it comes to utilizing blockchain technology. Its economy might well benefit most from adopting a digital currency. However, like other countries, it is facing the same concerns over hacking, financial crimes, and money laundering as such currencies become more widespread.
The latest meeting to address such issues was held in January. Among those in attendance were Ryozo Himino, FSA vice minister for international affairs, Yoshiki Takeuchi, vice minister of finance for international affairs, and Shinichi Uchida, BOJ executive director for international affairs.
The BOJ in particular plans to be prepared for issues related to Japan adopting a digital currency. Governor Haruhiko Kuroda previously stated there was no demand for a state-sanctioned digital currency in Japan, but still recognized one could arise once the regulatory challenges and risks were properly addressed: “We are advancing research and study from the technical and legal perspectives so that we will be able to move in an appropriate way when there is a growing need.”
Overseas developments
Developments abroad may be fueling these discussions in Japan. The People’s Bank of China began a two-year pilot program to assess digital yuan transactions. Beijing has made it clear any digital currency in China would complement the yuan, not replace it.
The Bank of England, the European Central Bank, and central banks in Sweden, Canada, and Switzerland have announced they would conduct a joint study on digital currencies with the Bank for International Settlements. Meanwhile, the US Internal Revenue Service is preparing to hold a cryptocurrency summit in March.
Lukewarm response
Meanwhile, some central banks are lukewarm about blockchains being used for CBDCs, Yahoo Finance reported.
Representatives of a number of the world’s central banks discussed their CBDC projects last week in Kyiv, Ukraine. The one-day conference was arranged by the National Bank of Ukraine, or NBU, which itself is a CBDC pioneer, having run its own digital currency pilot in 2018.
The central bank wanted to test its ideas and conclusions with the banking community and stimulate the discussion, the head of its innovative development department, Roman Hartinger, told CoinDesk. The speakers included representatives of NBU’s peers from Canada, Japan, Lithuania, Finland, Netherlands, Belarus, Uruguay and South Africa.
The discussion comes at a time when the world’s two largest economies are seriously exploring the possibility of issuing a CBDC, although China appears to be much further down the road than the US.
According to a report issued in September, NBU started exploring the idea of a digital currency, named e-hryvnia after Ukraine’s national currency, as early as 2016. In 2018, the central bank tested a digital token running on a fork, or modified copy, of the Stellarblockchain.
The pilot was run with the tech startup AtticLab, fintech companies Uapay and OMP 2013 and with “Big Four” professional-services firm Deloitte as an auditor, the report says. From September to December 2018, the NBU tested the software with a limited set of participants.
The tests showed that “there are no fundamental advantages in using specifically the DLT [distributed ledger technology] to build a centralized e-hryvnia issuance system” in which NBU is the only issuer, the report says. However, the central bank does not rule out an alternative “decentralized” model, in which multiple trusted payment processors would issue e-hryvnia.
The experiment is on hold, awaiting more input from the banking community and legislation regulating digital assets in Ukraine: while there are some drafts and conceptscirculated by the country’s authorities, formal laws are yet to be passed.
The skepticism about distributed ledgers was shared by Hartinger’s colleagues from the Netherlands and Canada at the Kyiv conference.
“The essence of the DLT infrastructure is that no single party should be trusted enough, but don’t we just trust a central bank to maintain the integrity of the global ledger?” said Harro Boven, policy advisor in the payments policy department of the Dutch central bank.
