Hiromi Yamaoka, Board Director at Future Corp and the Bank of Japan’s (BOJ’s) former head of the payment and settlements system department said in an interview that the country will take many years to launch a digital yen.
Yamaoka also mentioned that there are several reasons behind the delay, the most prominent one is a fear of significant outflows from private bank deposits due to a central bank digital currency (CBDC). The former BOJ executive said that there is no point in issuing a digital currency without a broader use.
“The fundamental question, and a very tricky one, is how to ensure private deposits and a CBDC co-exist. You don’t want money rushing out of private deposits. On the other hand, there’s no point issuing a CBDC if it isn’t used widely,” Yamaoka said.
While giving a possible solution for the mentioned problem of a deposit outflow, Yamaoka said that one idea would be to impose a limit on the CBDC holdings by a single entity. The issue with this particular solution is that the limitation would also cause price fluctuations.
Global CBDCs
Central Banks around the world are exploring the options to launch CBDCs, in a recent move, the president of the European Central Bank, Christine Lagarde said that the bank is likely to launch a digital euro in the next 2 to 4 years. The comments from Yamaoka came after a recent announcement from the Bank of Japan to run digital yen pilots in 2021. While talking about the role of the private sector, Yamaoka said: “BOJ and the private sector can work together to make digital settlements more convenient, the private sector has a key role to play in helping make various settlement platforms mutually compatible.”
Finance Magnates earlier reported about the UK’s plan to launch a CBDC. Furthermore, Lebanon announced to launch a digital currency by the end of next year.
