Closer to the digital Yen
The Bank of Japan (BOJ) plans to begin testing the feasibility of the digital Yen with the country's major commercial banks early next year.
During the testing process, the BOJ will allow consumers to participate in checking whether depositing and withdrawing money through bank accounts at commercial banks can be done smoothly with central bank digital currency (CBDC).
The BOJ has stated that it has no plans to issue a digital Yen. However, the bank is still checking the stability and feasibility of the payment system if it decides to issue such a currency in the future.
Governor Haruhiko Kuroda said in January 2022 that the BOJ is likely to decide whether to issue digital currency or not around 2026.
If the BOJ decides to issue a digital Yen, people will use the money through a special application on their smartphones.
However, there are still many challenges for CBDC if they want to be widely issued and used. Authorities need to ensure that CBDCs can be used even in emergencies, such as natural disasters. And especially it can be protected from counterfeit money or cyber attacks.
The BOJ is now in the second experimental phase of the feasibility study of the digital Yen since April this year. After that, the Bank of Japan hopes to cooperate with its super banks such as Mitsubishi UFJ Financial Group and Mizuho Financial Group.
If necessary, they will move to phase 3. At that time, private enterprises and end consumers will participate in a new pilot program.
Expectations to reshape the entire financial system
Although there is no immediate decision on whether to issue CBDCs or not, the wave of debate on how CBDCs will affect financial institutions is heating up.
Japan's financial system has faced a major change as non-bank credit institutions have begun to offer a variety of online payment methods. They took risks to enter commercial banks.
If CBDC is designed in such a way that commercial banks become the main intermediaries, it could shift business operations and data from those platform providers back to the bank.
Mr. Hideki Murai - head of the cryptocurrency segment of the ruling Liberal Democratic Party - said: "If the BOJ issues CBDCs, it will have a huge impact on financial institutions and the payment system of Japan. CBDC has the ability to completely reshape changes in our country's financial sector".
Mr. Murai also emphasized that the BOJ must ensure that the digital Yen is compatible with the CBDCs of other developed countries. Part of the reason was revealed to compete with China's acceleration of the issuance of digital yuan.
If the digital yuan becomes so convenient that it is used by tourists or becomes the main payment method for trade, the relationship between the Yen and the yuan could change. The yen's status as a safe haven currency is likely to erode, Murai added.
In Vietnam, representatives of the State Bank have repeatedly sent out the message: Bitcoin and other similar virtual currencies are not legal currencies and payment methods in Vietnam. The issuance, supply, and use of Bitcoin and other similar cryptocurrencies as a means of payment is an act that is not in accordance with current law.
