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The Bank of Japan (BoJ) has released a research report on central bank digital currency (CBDC), which examined the legal issues surrounding the issuance of CBDC in the country.
The report examines the models for CBDC issuance and discusses the legal issues that may arise from the implementation of CBDC within the Japanese legal framework, including issues pertaining to both private and criminal law, the Bank of Japan Act, legislation on data collection, and administrative and competition law.
The authors noted that legal money is limited to banknotes and money under the current law. Moreover, as it is difficult to include electronic currency, such as CBDC, as interpretation of banknotes, it is necessary to revise the law to give CBDC legality.
The report also touches upon several important concern areas related to CBDC including protecting personal information, preventing money laundering and terrorist financing, and how to deal with currency counterfeiting, duplication or disappearance.
“The specific system design of CBDC can vary greatly depending on the purpose for which CBDC is issued, and if we consider the issue of issuing CBDC, a more detailed legal review is required,” the report said.
This is not the central bank’s first research report on CBDC. Earlier in February, the BoJ had published a report, entitled “Digital Innovation, Data Revolution and Central Bank Digital Currency” that explored various CBDC concepts.
No Immediate Plans to Issue CBDC?
From what it appears, the BoJ is far from issuing a CBDC anytime soon. In a speech in July, Deputy Governor Masayoshi Amamiya said as much but clarified that the central bank will continue researching and studying CBDCs.
As for the reasons behind this continued research, Masayoshi detailed two motives. First, the central bank needs to be able to adapt itself to a situation where a need for CBDC issuance may suddenly increase, he said.
The second reason is that “through research into CBDC -- or through the CBDC lens -- central banks examine more fundamental questions such as: ‘What are the required functions of money?’; ‘What ways do we have of improving the complementary relationship between central bank money and private money?’; or ‘What ways do we have of enhancing the functionality of private digital currency?’ This process can offer clues for ways in which payment and settlement systems as a whole can be improved.”
Masayoshi had also revealed at the time that the BoJ is continuing its research into distributed ledger technology (DLT) as well. This includes Project Stella, a joint research project with the European Central Bank (ECB).
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