Japan’s new top financial regulator said the country should approach the promotion of cryptocurrency trading with caution.
Ryozo Himino said doing so might not be an effective way to promote technical innovation and that Tokyo should instead focus on introducing central bank digital currencies (CBDCs), as the Covid-19 pandemic could accelerate the transition to a cashless society, Reuters reported.
“Deregulating bitcoins and other cryptocurrencies may not necessarily promote technical innovation, if doing so simply increases speculative trading,” said Himino, who spear-headed last year’s G20 debate on regulating cryptocurrencies.
“We’re not thinking of taking special steps to promote cryptocurrencies,” he told Reuters on Wednesday.
Himino became the Financial Services Agency’s new commissioner in July, taking over from Toshihide Endo.
Under Japan’s chair, Group of 20 major economies last year agreed to set strict regulations on cryptocurrencies such as Facebook’s (FB.O) Libra, warning that various global risks they could pose must first be addressed.
Himino welcomed the Bank of Japan’s recent efforts to speed up research on CBDCs, saying Tokyo must look more closely at ways to address potential challenges if they were to be issued in the future.
“We shouldn’t be worrying about various challenges without even trying to design a plan [for issuing CBDCs],” he said.
“In the end, Japan must think really hard about whether to issue CBDCs because there are merits and demerits to doing so. What it can do now is to be ready so that when Japan decides to issue CBDCs, it can do so straight away,” he said.
Himino also said there was no “one-size-fits-all” solution for Japan’s struggling regional lenders, which are suffering from a shrinking local population, ultra-low interest rates and the hit from Covid-19.
Regional banks can use government bail-out programmes if they think that would best serve borrowers, though conditions have not deteriorated to such a degree so far, he said.
“At present, there isn’t any regional bank that is facing concerns over its financial health,” Himino said.
“If some of them do face financial challenges, there are various steps they can take such as cutting costs, coming up with ways to boost profits or raising capital from markets,” he said.
The Covid-19 pandemic has added to the pain for Japan’s roughly 100 regional banks already reeling from a sluggish economy and years of ultra-low rates that have eroded their profit margins.
Blockstream at G20
Himono was instrumental in the FSA’s decision to invite Blockstream’s Adam Back to a seminar in June 2019 held along with G20 Fukuoka, Japan, Cointelegraph reported. At the seminar, various stakeholders convened to discuss the potential of blockchain to construct decentralized financial systems.
In fall of 2019, Himono had characterized Facebook’s proposal to launch a stablecoin as “a ringing alarm clock to us all,” calling for more control over transformations in the economic system in order to prevent innovations from resulting “in a runaway disorder.”
In January, the Bank of Japan joined the central banks of the United Kingdom, European Union, Sweden and Switzerland in a collaborative study of potential use cases for CBDCS.
Later that month, the BoJ’s deputy governor said the institution must be “prepared to respond” to any potential surge in public demand for issuing a CBDC.
Bank of Japan appointment
The Bank of Japan has appointed Kazushige Kamiyama to head its payments and settlement department. This department has been overseeing digital currencies in the country, including its CBDC research, Coingeek reported.
Kamiyama is one of Japan’s leading economists and has been a huge influence on the BoJ’s digitization efforts. Kamiyama led the bank’s drive to utilise big data in real-time economic research and analysis. This approach enabled the central bank to navigate the economic challenges arising from the Covid-19 pandemic.