Masayoshi Amamiya’s Concerns on Digital Currency
In a recent discussion that sparked a mix of skepticism and curiosity, Masayoshi Amamiya, the deputy governor of the Bank of Japan (BOJ), expressed his outright doubts regarding central bank-issued digital currencies (CBDC). Speaking in Nagoya, he made it clear that the BOJ has no intentions of jumping on the digital currency bandwagon anytime soon.
The Monetary System Debate
At the heart of Amamiya’s argument is the claim that CBDCs wouldn’t necessarily enhance the existing monetary frameworks. He stated, “We are not looking to issue any digital currencies as they likely won’t add much to our current system.” In his opinion, the introduction of a CBDC wouldn’t solve the core issues faced by central banks—meaning, they still face the pesky low-interest rate trap.
The Zero Interest Rate Conundrum
Amamiya touched on a theory popular among some financial strategists: CBDCs might offer a way for central banks to manage the economy more effectively when interest rates fall to zero. Let’s break it down:
- A CBDC could allow banks to impose interest on deposits, theoretically encouraging consumers and businesses to spend rather than save.
- Unfortunately, Amamiya challenged this notion, arguing that mere existence of cash would defeat the purpose: “Why would someone keep their digital currency earning interest when they could just convert it to cash and dodge those charges?”
Cash Still King
Japan is famously cash-friendly, and for Amamiya, abandoning this method of payment is a big fat no. He stated, “Eliminating physical money from society is simply not an option for us.” It seems that for many in Japan, cash is still the preferred means of spending. And honestly, who can blame them? Nothing quite beats the satisfying crinkle of yen in your pocket.
A High Bar for CBDCs
Transitioning from traditional fiat currencies to an AI-powered, bank-regulated cryptocurrency isn’t as easy as throwing spaghetti at the wall to see what sticks. As Amamiya noted, this shift is a “quite a high hurdle” for the BOJ. Furthermore, he warned against associating cryptocurrencies solely with speculative investments, raising red flags about their reliability.
The Bigger Picture
Interestingly, this isn’t the first time Amamiya has let skepticism fly regarding CBDCs. Earlier in April, his stance was similar—hinting that a state-backed cryptocurrency could unintentionally rile up the already delicate financial system. However, he did underline that the bank is keeping an open eye on the rapidly evolving fintech landscape.
Shifts in Cryptocurrency Tax Policies
In other news this week, Japan is revisiting its approach to cryptocurrency taxes. A taxation policy committee is reportedly working on simplifying the notoriously complex tax filing regime surrounding crypto assets. So, less headache and more trading freedom? Count us in!
Innovation at LINE
Adding to the frenzy, Japan’s messaging titan, LINE, launched its newly minted LINK (LN) token on its own BITBOX cryptocurrency exchange. Could this be a sign that while the BOJ may be hesitant, the private sector remains eager to embrace digital currencies?
