Bank of Japan Doubts CBDC Is the Only Answer

The Bank of Japan will continue studying the possibility of issuing CBDC, but does not regard it as an alternative solution to the problems of digitizing payments. This was stated by Executive Director Shinisi Utida.

He confirmed that the regulator has no plans to issue a digital currency.

There is a strong likelihood that “a CBDC-enabled payment system as one element” will in the future become a global standard, Utida noted in his remarks at the first meeting of the coordination council. The Bank of Japan created the CBDC group in March 2021.

According to the director, the following six months confirmed this trend. The ECB began the exploratory phase, as a result of which within two years it will decide whether to issue CBDC or not. The Fed has intensified work in this direction, China is already conducting large-scale experiments, and some small economies have effectively launched a digital currency, Utida noted.

A group of seven central banks, including Japan, under the BIS published interim results of CBDC research. The Bank of Japan will continue its work in this area, the director added.

In April, the institution launched the first stage of testing the digital currency.

According to Utida, CBDC should be a means of addressing problems related to the digitization of payments. As an example of one such problem, he cited competition among private payment systems, which leads to fragmentation of the sector and hinders network effects.

The Bank of Japan is considering using CBDC to ensure interoperability of these systems and to reduce payments costs, as well as to improve efficiency. But the digital currency may not be the only option to solve the problem, Utida believes.

“The rollout of CBDC is costly for both central banks and private-sector intermediaries, so after thorough study it may be better to seek another method. This is a constructive step in choosing the direction for digital payment systems,” he said.

In his view, the regulator should continue studying CBDC to be ready for its potential rollout.

Earlier, in Japan, it was announced that a detailed plan for a digital currency would be developed by the end of 2022.

Subscribe to ForkLog news on VK.