Bank Of Japan’s Deputy Governor Underlines Three Constants Regarding CBDC

• Cryptocurrency is becoming a hot topic in the global market so rapidly that no conviction is going without its presence.
• The demand is so high, and there is only one way this demand can be filled.
• If Central bank will start working with the private sector and continue to improve the structure of payment and settlement.

Cryptocurrency is becoming a hot topic in the global market so rapidly that no conviction is going without its presence. At the Tokyo Future Payments Forum 2020, Masayoshi Amamiya, Deputy Governor of the Bank of Japan, recited a speech on this hot topic.

He mentioned that there are “three constants” and “three changes” regarding the payment and settlement system and currency in the country.

The scope is so broad peoples are looking for fast, convenient, and efficient payment methods. The demand is so high, and there is only one way this demand can be filled. That is only if Central bank will start working with the private sector and continue to improve the structure of payment and settlement.

In this matter, a serious question arose, that the central bank should issue a digital currency? There were two more issues in all of this, and they were in “In what form central banks should provide central bank funding” and “how to improve private-sector payment services. ”

He also mentioned that these two issues are closely related and should not be studied separately. While addressing these issues, he mentioned the importance of exploring how IT innovation and private-sector planning can impact payment and settlement and currency architecture.

Bank of Japan on CBDC

Now the “three constants” Central Bank should pay attention to according to Masayoshi Amamiya are:

1. The basic structure of the currency will remain unchanged.
   
   There are two forms of currency in token-based or account-based and Cash and electronic money. He wants future payment services will likely evolve based on one of two forms: token-based or account-based.
2. Two-tier currency system.

   In this system, financial resources are effectively allocated through privately led programs, and the system has the advantage of taking full advantage of private sector innovation services.

3. The role of the central bank will remain unchanged.
   
   Even if the use of banknotes continues to decrease and the Japanese economy enters a cashless society. The Bank of Japan will implement a monetary policy under a two-tier currency system by controlling the central bank’s current account (ie, digital currency) and act as a ” last lender.

Now the “three Changes” Central Bank should pay attention to according to Masayoshi Amamiya are:

1. Cashless payment will grow Steadily.
   
   In fact, except in special circumstances such as Sweden, the cash balances of major advanced economies have been increasing. In Japan, since the government in 2019, Nian 10 launched the month ” use of non-cash consumer reward program,” since the number of people using cashless payments appears to have increased.

   However, at the same time, the amount of outstanding Cash in circulation has also increased by 2% per year. The preference for Cash remains surprising. Having said that, as new services emerge and people learn more about their convenience, in the long run, progress towards a cashless society will not be hindered.


2. Money and Data will become closely linked.
   
   This strategy is called ” Data Network Activity (DNA).” In the past, shopping with payment, in other words, the exchange of a certain amount of economic value with currency.

   Today, it also means exchanging relevant data about who, when, where, and what. In some cases, the data exchanged can be data that has just seen online advertising but has not purchased anything.

   

   Therefore, as we explore the future of payment and settlement systems, it becomes particularly important to discuss issues related to the protection and effective use of personal data.

3. The Diversification of payment services providers is likely to continue.

   The payment system will be dominated by High tech companies instead of banks. The diversity of payment service providers can have a high impact on financial regulation and in the operation of payment.

Steve Anderrson

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.