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Central banks need to have a deep understanding of digital currencies before issuing one.
Many countries have expressed their interest in issuing digital currencies like China, France, and Turkey. The Central Bank of the Bahamas also announced that it will be rolling out central bank digital currencies (CBDC) in the second half of the fiscal year. Bank of Japan Deputy Governor Masayoshi Amamiya explained that CBDCs have risks and benefits. For instance, low-cost digital currencies could draw money away from commercial banks.
“When countries consider issuing central bank digital currencies, they must conduct a comprehensive study on how it affects their settlement and financial systems,” said Amamiya in a speech in Tokyo on Japan’s settlement system, Reuters reported.
Some economies are seriously considering CBDC due to weak financial infrastructure or to combat money laundering issues. However, Japan doesn’t face the same problem and is not in a hurry to issue its own CBDC.
“Unlike emerging economies, we cannot and should not jump immediately” towards issuing central bank digital currencies, Amamiya added.
Japan as well as Canada, Sweden, Switzerland, and the eurozone have been sharing their experiences in CBDC. The Bank of Canada announced recently that it has no plans of issuing CBDC soon.
“We have concluded that there is not a compelling case to issue a CBDC at this time. Canadians will continue to be well-served by the existing payment ecosystem, provided its modernized and remains fit for purpose,” Deputy Governor Timothy Lane said in his speech titled “Money and Payments in the Digital Age.”
Lane didn’t close his door from the possibility of CBDC because according to him, “the world can change very quickly.” Also, he said that they might issue CBDC when cash would not be enough for big transactions or if a digital currency from a big tech company would monopolize and erode the competition against the Canadian monetary sovereignty.
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