Japan Joins The Digital Currency Field According to Financial Regulators
TOKYO – Members of the Liberal Democratic Party, the leading political party in Japan, expressed Tokyo’s concerns about Facebook’s Libra, as well as China’s digital currency/electronic payment (DC/EP) to lead the global electronic payments scene.
The Central Bank of Japan, the government administration, and domestic private tech companies will be examining the issuance of a native digital currency in order to keep a surface touch with global changes in the fintech domain under a common agenda, Norihiro Nakayama, the vice minister of the Japanese parliament told Reuters.
“China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts…The first step would be to look into the idea of issuing a digital yen,” Nakayama said on Thursday, representing some 70 Liberal Democratic Party (LDP) regulators.
The group of lawmakers is led by one of the key party figures who has previously served as the financial minster for the country of the rising sun, Akira Amari, who is optimistic about a clean-cut proposal to the government will be drafted early next month.
Japan has recently changed its stance on public cryptocurrencies with the local Financial Services Authority (FSA) proposing a margin limit that would ensure people are not investing their life-savings into speculative digital assets hoping to make enormous returns, while it expects to attract more academic investors with this move.
Japan is not keen on being left behind China and Facebook on the matter
Although the sources say that we shouldn’t expect a Japanese CBDC soon, if at all this year, it seems that Japan is following China and the EU on the matter in order to maintain its relevancy in the global technoeconomical sphere.
More specifically, after President Xi Jinping’s public praise of blockchain technology where he stressed the importance of Chinese dominance in future financial technologies, Prime Minister Shinzo Abe told the Japanese parliament this morning that the government will work closely with the Bank of Japan in examining potential use-cases subjecting digital currencies and establish a way to upscale yen’s convenience as a global settlement tool.
Libra, which can be considered as the first private global digital currency proposal, and China’s DC/EP, which can be seen as the first state-backed central bank digital currency, are both rushing things for everyone else in the game.
Unlike Libra and DC/EP, Japan seems to have a calmer and less loud approach similar to the European Union, who is still working on the matter but has not announced any specific dates or solid plans as the above initiators had, and have failed to deliver several times already.
Nevertheless, many Japanese regulators involved in the process cited their concerns about China’s move, which could grab a significant piece of the future of emerging economies. As for Libra, we have covered many times its key characteristics, and what scares most international regulators about the project, is the fact that it was already an established network of over 2 billion active users.
Furthermore, the current minister of finance, Taro Aso had previously stated that China’s digital expanssion of yuan could become a serious problem, considering that Japan settles international transactions in USD terms.
According to Reuters, Takahide Kiuchi, a former Bank of Japan officer said that none of the countries should be concerned due to the fact that both China and Japan have totally different reasons to issuing a central bank digital currency (CBDC).
More specifically, Kiuchi believes that China’s main goal is to set yuan on the international monetary map, while Japan is considering a digital currency to shift the country’s dependence on fiat.
Therefore Kiuchi is confident that the Bank of Japan will be working with private tech companies to deliver a hybrid digital currency that is distributed by tech firms, yet overseen by central banks.
Regardless of the political differences, the strategy reminds me that China has been following for some time, where private tech giants such as Tencent, AliPay, and WeChat get to distribute the state-backed digital currency via their respective apps, while the government on its own turn would be eligible to access all the data and activity occurring on these platforms.
You can read Bank of Japan’s latest publication entitled “Digital Innovation, Data Revolution and Central Bank Digital Currency” here.