Bank of Japan Turns Down the Possibility of Central Bank Issued Digital Currency

Deputy governor of the Bank of Japan - Masayoshi Amamiya said that there are no plans for a central-bank issued digital currency at the moment, reports NewYork Times. Speaking at a meeting on Saturday, October 20, Amamiya expressed doubts whether digital currency will help steer ahead the monetary policies of the central bank.

However, some financial experts have considered that CBDCs can help central banks to control the economy once that the interest rates fall to zero. This theory - "zero lower bound” - notes that CBDCs can help central banks to stimulate the country’s economy by charging more interest on deposits made by firms and individuals which would push them to spend more money instead of holding it.

Amamiys, however, refutes this theory saying that charging interest on CBDCs can only work if the central bank moves towards an absolute digital economy by eliminating cash from the economy. Otherwise, individuals will start converting cryptocurrencies to cash and avoid paying interest.

"In order for central banks to overcome the zero lower bound on nominal interest rates, they would need to get rid of cash from society. "Getting rid of cash now is not an option for us as a central bank,” said Amamiya.

The deputy governor of BOJ further went to say that the bank is not doing any extensive research on CBDCs neither is it considering them for payment and settlement purposes. Amamiya noted that adopting banks-issued digital currencies over the sovereign fiat currencies "quite a high hurdle”. He said that digital currencies are usually treated as speculative investments rather than as a stable means of payment.

This is not for the first time that the Bank of Japan deputy governor is negating the concept of CBDCs. In April, Amamiya went to say that CBDCs can have potentially negative impact on the existing financial system.

Japan is said to be one of the most crypto-friendly nations with policies in line to promote a fair growth of the crypto and blockchain industry. At the same time its government has initiated several steps wherein it can ensure the security of its investors while trying to keep bad actors away.

Currently, tax authorities in Japan are working to develop a taxation system for digital assets while letting its citizens declare capital gains from digital currencies. The existing tax filing system is considered as too complex.

Not only Amamiya but even European Central bank president Mario Draghi has recently turned down the idea of CBDCs saying that the “underlying technology is still fragile”.