Business & Finance

Bank of Japan: Launching Crypto Would Require to Abandon Cash

Deputy Governor of the Bank of Japan, Masayoshi Amamiya has some concerns about the central bank’s cryptocurrency. The Banking guru according to a report by Reuters, has said that the bank has ruled out the use of cryptocurrency because launching a cryptocurrency would require the country to abandon cash.

He also said that the bank can also not make the negative interest rate policy more effective with their own Central Bank Digital Currency (CBDC) without turning the country into a cashless society.

He gave his statement while talking to an event held by a large publication. Amamiya said that the strategy of implementing the negative interest rates would not work unless Japan is turned into an absolute cashless society.

He said that if Bank of Japan issues a CBDC, the main transition would be to charge businesses and individuals negative interest rates for holding these CBDC to encourage investment in Japanese businesses to help the Japanese economy.

He argued that the main advantage of issuing these currencies would disappear as people would drop the digital coin and instead hold cash. He concluded:

To overcome the nominal zero lower bounds, central banks would need to eliminate cash. Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.

He also added that the move will affect commercial banking on a large scale, he said:

If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy

Last year Amamiya in a statement had called a central bank backed digital currency a disruption to the current two-tier system. These remarks came during a conference with the International Monetary Firm, in April 2018.

READ ALSO: Bitcoin Hacks Led to Crypto Exchanges Scrutiny by Japanese Banking Regulators

He said that the current system of the central bank acting as the first tier and the private banks as the customer-facing second tear is very stable. He praised the system saying “the wisdom of human beings in history to achieve both efficiency and stability in the currency system” he then went on to explain how the CBDC would affect the current system:

In this regard, the issuance of central bank digital currencies for general use could be analogous to allowing households and firms to directly have accounts in the central bank. This may have a large impact on the aforementioned two-tiered currency system and private banks’ financial intermediation.

Views on Libra:

In his statement during the event, Amamiya also weighed in on Facebook’s Libra. He showed his concerns about cryptocurrency and said that cryptos must comply with the money laundering and risk management regulations before becoming operational.

He added that it is Facebook’s responsibility to comply with different regulations around the globe before its crypto launch. In his views, the June 18 white paper offered not enough information about regulatory side of the cryptocurrency.

Despite his concerns about Facebook’s Libra, Amamiya said while praising Libra:

As for Libra, we must bear in mind that the potential global user-base could be enormous

READ ALSO: Japan to Cure Crypto Exchanges Biggest Dilemma

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Shahzaib Zafar

Electrical Engineer, Crypto enthusiast, a tech nerd and a developer with a keen interest in blockchain, writes daily articles about bitcoin and cryptocurrencies for blockpublisher.

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