Japan has joined the growing bandwagon of nations and regional blocs, considering the creation of a Central Bank Digital Currency (CBDC). The Bank of Japan (BOJ), Finance Ministry and Financial Services Agency (FSA) have decided to run further research on digital currencies and the potential of issuing one, the Japan Times said.

The financial and monetary authorities in the South East Asian nation are prepared to set up collaboration over digital currencies. It is in the direction of the circumstances concerning accelerated progress in financial and information technologies.

A source close to the Japan Times indicated that the three government agencies had held various meetings to review the economic consequences of digital currencies. They are, therefore, encouraging research and review on the technological aspects.

There was a meeting last month, which was attended by Yoshiki Takeuchi, vice-minister of finance for international affairs; Ryozo Himino, FSA Vice-Minister for International Affairs; and Shinichi Uchida, BOJ Executive Director for International Affairs.

The agencies are understood to have dissected how digital currencies might influence the global currency system, which is focused on the US Dollar, among other issues. 

Growing Interest In CBDC

In January, the Bank of Japan, Bank of England, the European Central Bank, the central banks of Sweden, Canada and Switzerland, together with the Bank for International Settlements declared plans to undertake a joint study on digital currencies. 

Digital currencies have a huge potential to reduce expenses associated with cross-border financial transactions like remittances and settlements. However, there are fears they might avail possibilities for money laundering and other financial crimes.

Though the Bank of Japan has not commenced comprehensive research on matters related to designing and issuing a digital currency, the Governor of the Central Bank, Haruhiko Kuroda has maintained Japan plans to be ready. Kuroda stated:

“We are advancing research and study from the technical and legal perspectives so that we will be able to move in an appropriate way when there is a growing need.”

Influence of Libra

It seems the announcement by Facebook to create the Libra Cryptocurrencies brought many governments and their central banks on their feet. Japan in response to that set up a liaison council on Libra, and now thinks it is necessary to research central bank-issued digital currencies.

Meanwhile, China claims it is ready to issue its CBDC sooner than later. If the Chinese government go through with this, it will make history by being the first country in the world to issue a Central Bank Digital Currency. 

The list of countries joining the bandwagon of CBDC keeps growing every month. Last month Hong Kong and Thailand likewise unveiled the outcome of research to test CBDC usage in cross-border remittances between the two countries. 

In December, France made public its intention to test a digital currency in early 2020. The French Finance Minister hinted that it was to counter Facebook’s Libra Cryptocurrency. 

Even though Libra seems to be dying out looking at how the partners have abandoned the project, it might have awakened governments around the world from their wait and see attitude.