Bank of Japan deputy governor said during a recent speech that central bank-issued digital currencies could disrupt the current banking system, not for the better.
The Bank of Japan’s (BOJ) deputy governor spoke negatively about the effects of central bank-issued digital currencies (CBDC) 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 (CBDC) 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 (IMF), 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.”
Amamiya sees the current “two-tiered” role of a central bank as communicating with other banks, who then deal with the private sector directly, as “reflect[ing] the wisdom of human beings in history to achieve both efficiency and stability in the currency system.” According to this point of view:
“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.”
Amamiya also mentions that central bank-issued cryptocurrencies could affect the way that the central bank gathers transaction information to maintain the stability of its payment system:
“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.
