CBDCs, or Central Bank Digital Currencies, are increasing in popularity and usage among different countries around the world. That is a fact. It is caused by the crypto fever catching up to governments and financial authorities. However, not every nation is adept to applying the idea.

A report coming from famous news center Reuters cites Bank of Japan (BoJ) officials turning down the chance of coming up with a central bank digital currency, saying that using them might require the nation in question to drop cash.

Regarding the controversial subject, the Deputy Governor Of The Japanese Central Bank Masayoshi Amamiya, cast shade on the idea that central banks could make negative interest rate policies more efficient by coming up with their own cryptocurrencies, or CBDCs.

Central Banks Would Need to “Eliminate Cash”

If the Bank of Japan were to decide to venture on issuing a digital yen and set a negative interest rate, both individual and corporate entities would be charged for the right to hold the CBDC in question. That would result, according to Amamiya, on investors and holders dropping the digital asset and, instead, holding cash.

According to Amamiya, “to overcome the nominal zero lower bound, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”

We are talking about a man that stated last year, in April, that the Bank of Japan was not even considering the idea of issuing a CBDC for people to hold, due to the fact that it could severely affect the currently implemented two-tiered system, damaging the existing financial stability in a country known for it.

“If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy,” the official observed.

Improbable Changes

As of now, central banks only provide access to specific entities. For example, private banks are among those, because they face holders in a second tier. If Japan were to launch a digital asset with the backing of the BoJ, the system would need to change in order for the currency to be stable, says Amamiya.

Amamiya, speaking at an event in Tokyo, also referred to Facebook’s latest project: the Libra cryptocurrency. A stablecoin by trade, Libra was unveiled last month by the social networking giant after months of waiting.

The BoJ deputy governor stated that digital platform operators, such as Facebook in this case, that are planning to launch a crypto project must know that they must show compliance with existing regulations on risk management and money laundering.

According to Amamiya, the Libra Association and Facebook need to act responsibly and comply with various regulations to take root as providers of safe and secure payment settlements. He explained that central banks must be “vigilant” of the potential impact of Facebook’s cryptocurrency on the nation’s banking and settlement systems.

“As for Libra, we must bear in mind that the potential global user-base could be enormous,” he said.

By Andres Chavez


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