15:39 JST, November 10, 2023
Central banks around the world are conducting research into and experimenting with the issuance of digital currencies. The Japanese government and the Bank of Japan should keep a close eye on overseas developments, examine the related risks and deepen debate on the need for digital currencies.
The European Central Bank (ECB) said it moved into a “preparation phase” this month for the issuance of a digital euro. The ECB intends to begin feasibility tests and selecting a business operator to develop the system. Following an official decision, the digital currency could be issued as early as around 2028.
Digital currencies convert money into electronic data for settlements and remittances. It is thought that smartphones will be able to conduct such transactions.
Some electronic monies are already in use — mainly those issued by private companies — but such funds can only be used at a limited number of stores, whereas digital currencies issued by central banks can be used anywhere, just like cash. Settlement is quick, and vendors can receive payments immediately.
Related digital technologies are advancing rapidly, and Japan must endeavor to lay the groundwork for their introduction.
Emerging countries lead developed nations in this regard. Digital currencies have already been issued by central banks in the Bahamas, Nigeria and other countries, and can be used by anyone with a smartphone — regardless of whether they have a bank account.
However, moves toward full-fledged adoption seem to be losing steam.
China previously conducted large-scale feasibility tests on a digital yuan and had been expected to lead the digital currency world. However, the widespread use of private-sector digital payment methods made it difficult for users to understand the benefits of the digital yuan, and its circulation has been sluggish.
In the United States, President Joe Biden signed a presidential decree in March last year instructing the U.S. government to hasten research and development toward a digital currency, but the debate seems to have stalled due to Republican concerns about the protection of personal information.
Japan, the United States and Europe initially have hastened to consider issuing their own digital currencies due to a sense of urgency that the digital yuan would spread rapidly and China would gain hegemony in the field. However, it can be said that the situation has changed somewhat.
In Japan, an expert panel of the Finance Ministry began discussions in April and plans to compile a report by the end of the year. Presently, issuance plans are still at a blank-slate stage, the ministry said. The first step should be to carefully identify the pertinent issues.
Fears have been voiced that personal information such as purchase histories could be obtained by central banks when people use digital currencies. If a large amount of deposits made with private banks are transferred into digital currencies, it could destabilize the financial system. The possibility of cyber-attacks and hacking must be borne in mind, too.
It is essential for the Japanese government and the central bank to make efforts to closely exchange related information on these issues with overseas authorities and accumulate technical expertise.
(From The Yomiuri Shimbun, Nov. 10, 2023)
