The Bank of Japan underlined the importance of a simple, interoperable central bank digital currency, should it decide on one.
In a speech on Friday, October 15 Bank of Japan’s Executive Director, Uchida Shinichi, addressed the topic of CDBCs. The remarks came at the second meeting of the Liaison and Coordination Committee on Central Bank Digital Currency. He made it clear that while cash is still in demand in Japan, the digital payment sector is growing.
As it stands there are substantial issues with interoperability of digital payments between private payment service providers. According to Shinichi, this prevents “full exploitation of economies of scale and network effects.”
Therefore, a digital currency issued by the Bank of Japan (BoJ) will be straightforward and compatible. It should act as a tool for private firms to develop financial and payment-related services for consumers.
“To achieve vertical coexistence, a relatively simple central bank digital currency design is desirable for the private sector,” he said.
In addition, the speech highlighted that the BoJ will continue with its series of CBDC experiments, the second phase beginning in April 2022. This round will focus on piloting potential features like a definite limit on an amount held by a major entity.
While some encourage quicker development of CBDCs, the BoJ said it still has no concrete plans. Japan’s central bank says it understands the weight of the decision whether to go forward with a CBDC or not.
“As adoption of CBDC could incur costs for both central banks and private intermediaries, both parties might come to conclude, after careful consideration, that they would be better off with a different approach other than CBDC.”
CBDC Developments
While Japanese financial officials carefully ponder this monetary technology, central banks around the world have their own experiments. According to recent information, nearly 80% of global central banks have research into CBDCs.
Late last month the Bank for International Settlements (BIS) created a prototype for multiple central bank digital currencies (mCBDCs). A few days later financial payment service giant VISA released a whitepaper which discusses interoperability between stablecoins and CBDCs.
However, much buzz and experimenting surround the topic, there are still major skeptics of the centralized sovereign digital currencies. Recently Edward Snowden took to Twitter regarding the potential destruction of savings and harm to wage-workers caused by CBDCs.
As mentioned above, Japanese central banking officials also noted risks and concerns.
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