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Japan sees ‘no public demand for digital currencies’, says central bank

By Ramla Soni

No global stablecoins project should begin until risks are addressed, says Bank of Japan

Japan sees no public demand for digital currencies says central bank

Haruhiko Kuroda, the Governor of the Bank of Japan has stated that no global stablecoins (GSCs) project should begin operation until “legal, regulatory, oversight challenges and associated risks are adequately addressed.”

He noted that it is essential for authorities worldwide to cooperate and maintain financial stability with free capital mobility in a world with stablecoins.

During Kuroda’s speech at the symposium for the 35th anniversary of the Centre for Financial Industry Information Systems, he addressed the challenges posed by private global stablecoins and central bank digital currencies (CBDCs), concluding that at present there is no public demand for CBDC in Japan.

“In Japan, the amount of cash outstanding is still increasing, and it does not seem that there is a demand for CBDC from the public at present. Nevertheless, the Bank of Japan has been conducting technical and legal research on this matter in order to stand ready when the need for CBDC may arise in the future. The Bank also needs to study the impact of CBDCs on financial intermediation.”

He said that the spread of global stablecoins could “undermine the effects of monetary policy transmission and financial system stability.”

Therefore, the public authorities, as providers of a public good (i.e. financial stability), need to not only support private sector innovations but also promote the use of digital money denominated in a fiat currency in their jurisdictions, the bank said.

While Kuroda does not currently see a reason to issue its own digital currency, he said that “there is a wide variety of private digital money denominated in Japanese yen,” and so It is “very important” to promote the use of such private money by improving its functions to bring it closer to the expected functions of CBDC.

FURTHER READING: EU rethinks its approach to regulating stablecoins

FURTHER READING: Switzerland will continue to monitor stablecoins and blockchain

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