Culture
Japan may soon offer a digital version of the yen
With economic giants like China and the UK working on their own central bank-run digital currency plans, Japan is intent on not being left behind.
As some of the world's major power players eye the possibility of digital currencies, Japan is also reportedly considering a digital yen, according to Nikkei.
Although there is no indication of a timeline or other details about how the currency would be secured or work, the report suggests Japan is quietly seeking to join the likes of other governments interested in central bank digital currency (CBDC) programs, including the United Kingdom, China, Sweden, and Switzerland.
Whether it's a consideration caused by geopolitical tensions with China or the phenomenon of cryptocurrency gaining ground around the world, Japan's interest in CBDCs could bring in titans like the Mitsubishi, Mizuho, and Sumitomo financial groups. And it may even calm the country's deflation fears.
CBDCs take on cryptocurrency — CBDCs are fundamentally different from cryptocurrencies as they're not a standalone unit of value, but instead, the digital form of traditional money. It's decidedly in opposition to what cryptocurrency proponents want: a system beyond the current system of central banks and the economic mechanisms that come with them. Cryptocurrencies, meanwhile, are governed by online networks and are philosophically hostile to the concept of a centralized governance body, which CBDCs would completely adhere to.
Traditional governments are being compelled to take cryptocurrency and blockchain seriously by providing their own versions within the confines of current monetary policies and trade surpluses. Another advantage that CBDCs would have over cryptocurrency — and this is something that the governments in the United Kingdom, China, and Japan seek — is that CBDCs are de facto recognized as legal tender whereas cryptocurrencies don't enjoy that power. At least, not yet.
The cost-effective appeal — For major Japanese banks, the impulse to join the CBDC route could also be compelled by pure logistics. If the country does offer CBDC as an officially accepted and recognized monetary approach, it could radically reduce the time that goes into transfer and settlement cases and it could boost economic growth.
It'll take major convincing — Countries like Sweden, Switzerland, Japan, the UK, and China seem nearly persuaded by the power of CBDC, and it could stoke growth in various commercial and financial institutions. Still, there's a considerable degree of skepticism around the subject — and that's entirely understandable.
If CBDCs and cryptocurrencies share something in common, it is that they both raise a good deal of legal, regulatory, and operational concerns. But if the supporters of digital financial instruments in central banks can convince commercial banks to join them in their enthusiasm, we might end up seeing not only a digital yen but a digital pound, dollar, yuan, euro, and more.
