Bank of Japan says no to central bank-issued digital currencies

Central banks would not enhance their monetary policies by issuing digital currencies, according to Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya.

“In order for central banks to overcome the zero lower bound on nominal interest rates, they would need to get rid of cash from society,” he said in a speech at a meeting of academics in Nagoya.

Ditching cash is not an option as it is still widely used in Japan. Amamiya said the BOJ has no plan to issue digital currencies. There was “quite a high hurdle” for crypto-assets to overcome sovereign currencies as the main means for payment and settlement.

“This is backed up by the fact that crypto-assets are rarely used for day-to-day payment and settlement, and are mostly a target for speculative investment,” he said.

FSA

Japan’s financial regulator, the Financial Services Agency (FSA), recently said it would like the cryptocurrency industry to grow “under appropriate regulation”.

In an interview with Reuters, FSA Commissioner Toshihide Endo claimed the regulator had no intention to curb the crypto industry excessively. Instead, it was trying to strike a balance between protecting consumers and promoting technological innovation.

Crypto first

Last year, Japan became the first country to regulate cryptocurrency exchanges. The FSA started clamping down on the industry following the $530 million (£411.5 million) theft of digital money from Tokyo-based Coincheck in January.

A series of FSA inspections uncovered poor management and a lack of basic internal controls at several exchanges. As a result, some exchanges were ordered to temporarily suspend operations.

The FSA is also thought to be refining its regulatory framework around cryptocurrency exchanges in order to boost consumer protection and better secure investor assets. It considers the current consumer protection mechanisms afford by the Payment Services Act to be insufficient, according to local publication Sankei.

The review could see crypto exchanges being brought into the realm of Japan’s Financial Instruments and Exchange Act, which requires traditional securities firms and stock brokerages to manage customer funds and securities separately from corporate assets. This shift could result in cryptocurrencies being classified as a financial product, giving them exposure to mainstream financial markets.