Bank of Japan will not rely on China for central bank digital currency research

The Bank of Japan (BOJ) has been under pressure to announce a sovereign digital currency launch officially. However, the head of the central bank's payment system department Kazushige Kamiyama reckons that public support is required for such a move. The senior official made the remarks even after another announcement stated that the digital yen testing would commence in 2021.

There is no conclusion yet.

At the end of the day, there's no way we can proceed without gaining sufficient understanding from the Japanese public.

Kamiyama stressed that when the decision to launch a digital unit of the yen is finally made, its purpose would be to improve Japan's transaction ecosystem. Moreover, the digital yen will operate side by side with the fiat financial system. Other electronic systems already in place will also coexist with the digital currency.

The comments suggest that the BOJ is not in a hurry to launch a digital yen. However, the central bank wants to understand how a potential launch would impact the existing systems. Simultaneously, the regulator would like to ascertain the conditions that must be met before going forward.

We have clearly stated that banknotes and digital currency will coexist.

The digital currency won't be useful to deepen negative rates because there will be banknotes.

The progress China has made towards the launch of a digital yuan has sparked interest from central banks worldwide. Unfortunately, the digital currency ground is still relatively undiscovered and, therefore, not an easy path to walk. For this reason, regulators globally are approaching the matter with caution.

The International Monetary Fund (IMF) recently pledged its support in research surrounding central bank digital currencies (CBDCs). Nonetheless, the IMF reckoned that CBDCs are unlikely to solve all the challenges currently being faced.

The United States Federal Reserve Chair, Jerome Powell, also said in a virtual conference with the IMF that the Fed would rather get it right than be the first. The US central bank has been under pressure to make public plans for a digital currency from some legislators and leaders in fintech, who believe the country is falling far behind China.

Kamiyama added that extensive research is the only way to understand the digital currency ecosystem. The study is critical to the Japanese central bank as, according to the BOJ official, "it is not desirable that what China is doing becomes impossible to understand for us."

Meanwhile, the use of digital payments has been accentuated by the coronavirus pandemic, which continues to cause havoc to the standard way of life worldwide. Less cash is being utilized globally as a way of protection from the novel virus.