Bank of Japan (BoJ) Governor Haruhiko Kuroda has expressed his optimism that central bank digital currencies (CBDCs) can exist with other payment mechanisms in the Japanese payment ecosystem.
Kuroda’s comments were contained in a Tuesday speech titled “Evolution of Payments: Payment Systems for Neoteric Individuals,” where he hailed the potential of CBDCs in improving payments for consumers. The central bank chief claimed that CBDCs, in addition to improving enhanced user convenience, are integral in improving financial inclusivity and cross-border payments.
Kuroda noted that payment instruments like stablecoins, cash, bank deposits, and digital currencies are embroiled in a struggle for dominance, but building on their strengths is critical. The central bank governor told attendees to the financial summit that “only by doing so can a payment system as a whole remain safe, efficient and resilient over the course of time.”
Kuroda pointed out that the central bank’s payment options are expected to take the lead to ensure uniformity and peaceful coexistence in the space.
“When central bank money, which provides the unit of account, is converted without friction to and from other forms of money, this makes it possible to ensure the uniformity of money,” said Kuroda. “In other words, maintaining a situation where one yen is one yen regardless of payment instrument.”
The BoJ is set to launch a CBDC pilot in April after beginning consultations in 2020 in a move that will see increased collaboration with several private sector firms. The digital yen pilot will not be wholly centralized but will be subdivided into various systems for efficiency, largely building on the previously concluded Proof-of-Concept (PoC) stage.
“On this basis, we plan to test the end-to-end process flow and outline the measures and potential challenges for connecting the experimental system with external ones,” said Uchida Shinichi, an executive director with the BoJ.
Lifting the lid on stablecoins
In line with Kuroda’s statement of ensuring a healthy coexistence between multiple payment systems, Japan’s Financial Services Agency (FSA) announced that it would be lifting the ban on foreign stablecoin that will allow their listing on local exchanges in the country.
However, the FSA notes that only stablecoins that meet the regulatory agency’s requirements will be allowed to be listed. Initial plans to lift the ban began in December 2022, followed by a month-long public consultation with insiders touting June 2023 as the tentative date for lifting the ban.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs and BSV
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