The deputy governor of the Bank of Japan Masayoshi Amamiya has reiterated his skepticism about any relevance that may abound in the use of central-bank-issued digital currencies (CBDC) in the existing monetary system.
His negative take on the issue was first made known in his closing remarks at the IMF-JFSA-BOJ Conference on FinTech on April 16, 2018. Amamiya brought the matter to the fore again at a meeting held on Saturday in Nagoya, central Japan. He further disclosed that the Bank of Japan had no plans of issuing digital currencies.
Central-bank-Issued Digital Currencies
While shedding light on the matter in the article, Amamiya began by making references to financial experts who consider central-bank-issued digital currencies as a tool which can be exploited by central banks in controlling the economy once interest rates are at zero.
Proponents of this school of thought are of the opinion that CBDC provides leverage for central banks to stimulate the economy by increasing the interest rates levied on both individuals and firms. By so doing, the propensity for firms and individuals to spend money will increase.
Amamiya, however, thinks the theory needs to be put upon inquiry. In his view, the workability of charging high interests on central bank-issued currencies is dependent on the willingness of central banks to eliminate fiat currencies from the financial system. So long this is most unlikely to happen, the public will still be given to the habit of obtaining cash in exchange for digital currencies to avert the payment of interest.
“For central banks to overcome the zero lower bound on nominal interest rates, they would need to get rid of cash from the society.”
Japan’s central bank is, however, not considering the option of eliminating fiat money going by the acceptability of cash as a popular method of payment among the populace according to Amamiya.
A High Hurdle
Delving further on the central bank’s policy on CBDC, the deputy governor remarked that the bank has no plan of creating a legal tender in the form of a CBDC. Paraphrasing his stance on the issue, Amamiya sees the idea of resorting to bank-issued crypto from the existing sovereign currencies as “quite a high hurdle.”
He buoyed his position by the speculative nature of investments in crypto assets which from an analytical perspective, does not count as a stable means of payment.
Observers might have thought Amamiya would be open to the application of burgeoning economic technologies such as crypto in the future when he presented the closing remarks sometimes in April.
Having rammed home the unlikelihood of crypto assets becoming a central bank-certified legal tender, the exploration of blockchain applications may only compete keenly with traditional financial institutions in theory.
Cryptocurrency Tax Reporting
During the week, efforts at facilitating the cryptocurrency tax reporting process were deliberated upon by a Japanese taxation policy committee, with participants considering it pertinent to soft-pedal on the complex tax filing regime.
The taxation procedure of digital currencies has generally been a matter of debate globally with the law not stipulating clearly whether it is a property or a currency. The volatility in exchange rates makes it somewhat difficult to establish a defined taxation period for them.
Some cryptocurrencies were designed in such a way to keep the owner anonymous, and this makes it even more difficult for the government to levy a tax on such individuals or firms. With its burgeoning clout, tax regulators are beginning to take the cryptocurrency market serious.
Cryptocurrency market is a big deal in Japan as many corporations continue to incorporate and develop blockchain technologies into their system. On October 16, Line Corporation made its newly-developed LINK (ln) token tradable on its native BITBOX cryptocurrency exchange. The messaging app provider introduced its new token to take the tally available on the BITBOX exchange to thirty.
Line Corporation hopes to leverage blockchain applications still as it is also developing a decentralized application (DApp) to enable LN holders the opportunity of spending their token in the system.