Japan’s digital currency could be a joint initiative between the government and private companies, according to Norihiro Nakayama, parliamentary vice-minister for foreign affairs.
“The first step would be to look into the idea of issuing a digital yen,” said Nakayama, a key member of the group which is comprised of about 70 Liberal Democratic Party lawmakers and led by former economy minister Akira Amari.
The proposal is planned to be submitted to the government by next month. The digital currency, however, won’t be issued any time soon due to technical and legal issues.
Earlier this week, as we reported the Bank of Japan joined six of its counterparts to assess the potential of issuing digital currencies in their countries. The interest in digital currencies is heating up, just today Prime Minister Shinzo Abe told parliament that the government will be working with the central bank in studying digital currencies and finding ways to improve the yen’s use as a settlement means.
Digital Yen in Retaliation to the Digital Yuan
In this race to digital currencies, China has emerged as the winner as after five years of research, it is ready to become the first central bank to launch a CBDC.
Some of the Japanese lawmakers have voiced concern over Beijing’s move to digitize yuan and if it becomes a popular means for international settlement, Finance Minister Taro Aso said it would be a “very serious problem.”
However, former BOJ board member Takahide Kiuchi said while China’s motivation behind digital yuan is to increase its local currencies’ clout in the global community, for Japan it is to change its cash-loving culture.
Japan is not the only one feeling threatened by China’s digital currency, a growing number of voices are also calling for the US to issue a digital dollar.
Former CFTC Chairman, Christopher Giancarlo aka “Crypto Dad” has set up an organization to look into the framework and potential of a digital dollar.
“If it (U.S. dollar) remains an analogue currency the challenges of using it in a digital world are very complex,” said Giancarlo during the World Economic Forum at Davos.
Digital Yuan can help countries evade US sanctions
Meanwhile, Neha Narula, director of the Digital Currency Initiative at the Massachusetts Institute of Technology (MIT) told CNBC at Davos that “this (development of digital yuan) is a national security concern.”
“Financial sanctions are a very important tool to the United States and (…) one must consider the risk of a digital currency issued by another country gaining market share and affecting the U.S.’s ability to engage in financial sanctions and use them as a tool,” she added.
Experts are raising concerns over its lack of privacy as well as digital yuan will give the government the ability to know about every transaction which Jeff Schumacher, CEO of 55 Foundry said could also be “a preparatory step to let its currency float,” because it “cannot sustain this multi-currency approach.”