Japan is experimenting with the possibility of launching a digital version of its currency in a bid to rein in cryptocurrency usage. The latest insights from the central bank have revealed that the central bank digital currency (CBDC) will not be used as a means to achieve a negative interest rate.
The Bank of Japan (BOJ) announced that the digital iteration of the yen will not serve the function of attaining negative rates, contrary to the opinion of several experts. The bank’s Executive Director Shinichi Uchida disclosed the development to the public in his latest speech.
“While the idea of using such a functionality as a means to achieve a negative interest rate is sometimes discussed in academia, the Bank will not introduce CBDC on this ground,” said Uchida. The executive took the opportunity to add that if launched, the CBDC will be packed with interesting features.
Uchida noted that the Bank was experimenting with imposing a limit on the transaction amount of each individual or entity. The BOJ is also mulling over the feature of making the digital yen interest-bearing in a way that closely resembles bank deposits. The chances of the BOJ creating a digital yen with these features are plausible given the layers of experimentation that the apex bank is giving to the CBDC.
On March 22, the BOJ announced that it had completed the first phase of the CBDC in accordance with the planned schedule. Called the Proof of Concept (PoC) stage, the bank focused on the foundational issues of issuance, distribution and redemption. The second stage of experimentation is billed for April and seeks to identify potential challenges to the digital yen and to add extra functionalities to the CBDC. The BOJ had previously launched large-scale CBDC experiments in a collaboration with the European Central Bank to explore blockchain technology for cross-border payments.
CBDCs around the world
Around the world, CBDCs are picking up the pace with some countries in the final stages of experiments before launch. Nigeria and The Bahamas are among the countries that have launched their version of CBDCs while some other countries are at various stages of their development.
“Central banks are rolling up their sleeves and familiarizing themselves with the bits and bytes of digital money,” said Kristalina Georgieva, IMF Managing Director on the frantic pace of development. The IMF has hailed the potential of CBDCs saying that if they are designed well, they will offer “more resilience, more safety, greater availability, and lower costs than private forms of digital money.”
On the other hand, Biden’s executive order on cryptocurrencies gave US regulators the green light to explore the possibility of a digital dollar while China’s digital yuan is gearing to become the leader in the space.
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Source: https://beincrypto.com/bank-of-japans-cbdc-will-not-be-used-to-combat-negative-rates/