Few things are as indicative of the progress that cryptocurrency has made on the world stage as the increased attention being paid to Central Bank Digital Currencies (CBDCs). China is currently rolling out its digital yuan, France is testing the digital euro and the Bahamas have fully rolled out their own digital currency.
However, it appears that Japan will not be joining the list of countries with active CBDCs just yet. According to a former official from the Bank of Japan, the institution is concerned about the long-term effects of such a development and thus, it may take years before it comes to fruition.
Digital Yuan Not Coming Soon?
This new information comes courtesy of Hiromi Yamaoka, former head of the payment and settlement systems department at the Bank of Japan. In a recent interview, he claimed that the bank will need several years before it can issue the token as they are concerned about the potential outflows from private banks in response to the token.
He also claims that there is no benefit to issuing a CBDC if it is not going to be a widely used one.
“The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist. You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely,” he said.
Currently, Yamaoka is the chair of a group of banks that are working towards creating a settlement infrastructure for digital payments. He feels that some of the concerns of the Bank of Japan can be mitigated. One way to do this, he suggests, is to put a limit on the number of digital yen that can be held by a single individual.
There is a downside to this, however, as it could trigger a fluctuation of the price of the CBDC which could inconvenience those trying to make digital payments. For now, Yamaoka says, both the private sector and the Bank of Japan are trying to create better structures to facilitate digital payments.
This year, the use of digital payment structures increases dramatically following the COVID-19 outbreak and it is apparent that the issue cannot be ignored anymore. Should many other countries launch their CBDCs in the next few years, there will be even more pressure on Japan to launch its own.
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