In April, the BIS announced the launch of the project, involving seven central banks, including the Bank of Japan, the Federal Reserve Bank of New York and the British, French and South Korean central banks. The telecommunication firm Internet Initiative Japan will use the yen-pegged digital currency for clean energy settlements. In many countries, including Japan, the idea prevails that securing a two-tiered system with the kind of advantages that I have just mentioned is also preferable when implementing CBDC. At the same time, because CBDC, unlike cash, does not take up any physical space, there is concern that a sudden and large-scale flow of funds from deposits to CBDC could have an excessive impact on the two-tiered system. As a preemptive measure, many countries have been considering putting in place a safeguard, for example, by imposing a ceiling on users’ CBDC holdings. But such a push for cashless transactions, or digitization of currencies, would be difficult for a single company to undertake.
Henry Gresham, an English merchant and financier living in the 1500s, the Tudor period, was exploring the debasement of minted coins. But the concept of “good money” is increasingly applied to modern digital currencies such as cryptocurrencies. This trend is intersecting with community currencies — currencies issued at a local level to encourage growth and development — that were intended to reduce both the Covid-19 infection rate and the outflow of currency from communities. Japan has a mature ecosystem for community currencies, having experimented with them since 1973. Its purpose was to support women volunteering in childcare and healthcare, offering one point (about 400 yen) to volunteers per hour of service.
As Japan accelerates its drive toward a digital future, these developments could mark a pivotal moment in the global evolution of digital currency. McKnight underscores the significance of DCJPY as a bridge between traditional finance and the crypto world. “The biggest use case for stablecoins is always as a settlement layer. In the world of volatile cryptocurrencies, we need to have a stable asset that can be used for settlement,” she emphasized.
This eliminates the previous challenges of international transactions, where payments in local currencies posed significant obstacles. The Financial Zone will be dedicated to banks creating digital currency by tokenizing Japanese yen deposits on the blockchain, while the Business Zone will be reserved for transactions. The successful rollout of the digital yen could influence global financial trends by showcasing the importance of innovation in driving economic growth, positioning Japan as a leader in the digital economy. Cross-border payments involve not only issues of time and cost, but also a host of more difficult challenges such as the protection and use of transaction information among nations. Transacting in digital assets could result in significant losses and may not be suitable for some consumers.
For example, with electronic money, the place of use is limited to member stores, and stores need to wait for the payment from the settlement company. However, CBDC can be used anywhere, and the stores receiving the payment can make immediate use of it for purchases and other payments. One exception to this trend is the European Central Bank, which has been actively investigating a ‘digital euro’ CBDC.
As more people opt for digital payment methods, Japan recognizes the need to update its financial infrastructure. A digital currency could streamline transactions, potentially boosting economic activity and reducing cash handling complexities. Financial institutions and nonbank entities may be competitors, but there is more than a little room for them to work well together. For instance, if financial institutions could share the user verification knowhow they have amassed with nonbank entities, it would permit those financial institutions to earn appropriate revenue while also enabling the nonbank entities to effectively prevent money laundering and other such activities. Presumably, the high tax rates that residents and non-residents must pay in Japan incentivizes some individuals and companies to understate their capital gains from cryptocurrency transactions on their tax returns.
More specifically, this means payments of funds in cases where individuals purchase goods or services from privately owned stores or non-profit organizations. Compared to simple PtoP transactions, payment/receipt security and safety are all the more crucial. For governments and financial institutions, the streamlining of administrative procedures is another major issue.
One guideline exchange is expected to follow the JVCEA’s guideline to restrict margin rates by 4x or less. The purpose of restricting margin trading is to limit the maximum amount that investors can lose on risky cryptocurrency trades. Digital community currencies such as Sarubobo Coin in Hida Takayama City and Aqua Coin in Kisarazu City, have been spreading in local communities, aiming to become “good money”. To encourage their use, employees of local government, local institutions and chambers of commerce receive those coins as part of their monthly payment packages. Whether they will be able to create a virtual local currency market in the respective communities and succeed in supporting regional development is another question. If the circulation of these currencies can spread from the consumer goods market to include production goods, investment goods and labor, then these digital currencies will be on their way to becoming “good money” in their communities.
According to McKnight, “It’s a very big step forward. I’m optimistic about the introduction of a stablecoin that is not USD based. Circle USDC has been the only single player. I think it’s really important that we introduce non-USD backed stablecoins.” Although the white paper refrains from specifying the names of the network participants, DeCurret itself boasts the support of 35 shareholding companies. The primary issuer of the DCJPY, backed by deposits in Japanese yen, is set to be Aozora Bank. The Bahamas’ successful implementation of the Sand Dollar, its digital version of the Bahamian dollar, provides insights into addressing technical, financial inclusivity, and regulatory challenges during the launch phase. NRI’s corporate philosophy “Dream up the future” embodies our spirit of “Boldly creating the future we envision”, as the future has yet to be decided.
This intangible feature is a crucial point in considering the differences between CBDC and cash. Virtual currencies with no official issuing bodies face such fluctuations that would stop them from taking root as a means of payment. He stressed that businesses from many different sectors joining hands will give a much-needed boost in promoting such currencies. In announcing the venture on January 25th, Internet Initiative Japan chairman and CEO, Koichi Suzuki, said a cashless society has already emerged in China, and that Japan should not fall behind the global trend. Quanta Intelligence is the ultimate source for comprehensive business insights on the latest AI news. Our platform offers in-depth analysis and expert commentary on the latest developments in artificial intelligence, helping you stay informed, competitive, and ahead of the curve.
