Bank of Japan official downplays fears over China’s digital currency

No single digital currency will dominate global transactions if central banks strive to enhance their own settlement systems, a senior Bank of Japan official said, brushing aside fears China’s rapid progress on a digital yuan could upend markets. China, which has been ahead of other major economies in experimenting on a digital currency, has publicly said it aims to become the first to issue one to reduce its dependence on the global dollar payment system.

Kazushige Kamiyama, who heads the BOJ’s payment and settlement systems department overseeing CBDCs, said China may have a “first-mover” advantage on issuing a digital currency. “But new technology is invented all the time. Even if you’re ahead on the technology available now, you could get locked into what becomes old technology as time passes,” he told Reuters.

As with other central banks, the People’s Bank of China is likely developing a digital yuan mainly for the purpose of creating a stable, efficient settlement system, he added. “I don’t think a single digital currency will dominate the world, as long as each country makes full efforts to improve its settlement system,” Kamiyama said.

Japan has been cautious about moving too quickly on CBDCs given the social disruptions it could cause in a country that has the world’s most cash-loving population. But China’s progress toward issuing a digital yuan has prompted the government to reconsider and pledge in this year’s policy platform to look more closely at the idea.

The BOJ announced last week plans to begin experimenting from next fiscal year whether it can issue a digital yen, joining peers in catching up to rapid innovation. Kamiyama said he hopes to begin the first phase of experiments at the start of the next fiscal year in April and move to the second phase by the end of the business year in March 2022. But Kamiyama said the BOJ was in no rush to issue CBDCs and would carefully examine ways to ensure a digital yen won’t cause any disruptions to monetary policy and the banking system.

Bank of Japan official downplays fears over China’s digital currency, Reuters, Oct 15