A politician who leads the digital currencies study group in Japan’s ruling party said that by the end of next year, lawmakers will shape how the digital yen works.
Hideki Murai of Japan’s Liberal Democratic Party said that by the end of 2022, lawmakers will have a “clearer picture” of what Japan’s state-owned cryptocurrency should be like.
Although lawmakers do not plan to make a decision on the issuance of the state cryptocurrency anytime soon, more detailed information on its structure could spark controversy about how the issuance of the digital yen could affect financial institutions, he said.
Japan’s financial industry is already undergoing massive changes as non-bank lending institutions from retailers begin to offer various online settlement tools, thus affecting the commercial bank market.
As Murai notes, if the state cryptocurrency is designed in such a way that commercial banks become key intermediaries, this will facilitate the return of business and settlements to the banks.
“If the Bank of Japan issues a government-owned cryptocurrency, it will have a huge impact on financial institutions and Japan’s settlement system,” Murai said. “The digital yen could completely transform the changes taking place in the Japanese financial industry.”
Murai also said the Bank of Japan should ensure that the digital yen is compatible with government cryptocurrencies in other developed countries, in part to counter China’s progress in issuing the digital yuan. The Bank of Japan is part of a group of seven major central banks that are jointly studying the basic characteristics of government cryptocurrencies.
“If the digital renminbi becomes so convenient that it is often used by tourists, or becomes the main settlement instrument in trade, the ratio between the yen and the renminbi could change and undermine the yen’s status as a safe haven currency,” Murai said.
As a reminder, in April, the Central Bank of Japan launched a proof of concept (PoC) test for the government’s cryptocurrency. This testing phase will last until March 2022. In the same month, the Bank of Japan called for the creation of common rules for the issuance of state-owned cryptocurrencies.
