BoJ urges other central banks to get a better understanding of CBDC impact
- BoJ official recently spoke about multiple central banks' rush to create their own CBDCs, stating that they should slow down.
- The bank's deputy governor, Masayoshi Amamiya, believes that regulation and government oversight is the right way to deal with the pressing financial problems.
- Japan's central bank plans to start a team to create its own CBDC, although it will likely take Amamiya's advice and approach it with caution.
Ever since Facebook announced its Libra, China had stepped up its efforts to create its own CBDC. In fear of both, many other central banks around the world started developing their own central bank digital currencies, or at least considering and studying them and their potential effects.
However, the BoJ (Bank of Japan) Deputy Governor, Masayoshi Amamiya, seems to believe that the banks are reacting too quickly and without enough understanding of how CBDCs would work, their advantages and downsides, and alike.
Regulation and oversight are the way to go, says official
Copy link to sectionAmamiya also stated that the banks need to consider the ways of preparing for potential downsides of launching a cryptocurrency. He said that banks might start acting as connectors for private money flows, which would help streamline settlements. Further, CBDCs could also reduce financial innovation in the private sector, while the money would be pulled from commercial banks in terms of deposits, especially if the CBDCs end up being low-cost.
He continued by saying that countries need to conduct a comprehensive study if they want to consider issuing a CBDC. Bank-issued coins have been an idea for a long time, as it is believed that they might help combat money laundering, and improve financial infrastructure. However, some countries — such as Japan, and others that do not suffer from financial structure resilience problems — believe that there is no need for CBDCs. Or, at least, that there is no need to rush their creation.
Amamiya then urged the banks to reconsider their approach, stating that the way to deal with money laundering and similar problems is through regulations and oversight. Despite his claims, other BoJ officials still plan to create a team that would examine CBDCs and understand their potential. They will also consult with colleagues in other countries regarding the topic.
