China is in the process of introducing a digital version of its yuan currency. Photo: iStock

Downplaying fears that China’s accelerated progress on its digital yuan could upend markets, a senior Bank of Japan official said on Thursday that no single digital currency will dominate global transactions if central banks strive to enhance their own settlement system, Reuters reports.

China, which has forged ahead of other major economies in developing a central bank digital currency (CBDC), has publicly stated that it intends to become the first country to issue one. Its aim is to reduce its dependence on the global dollar payment system.

In efforts to catch up with China and private projects such as Facebook Inc’s plan to issue its own virtual token, seven major central banks – including the BOJ – last week laid out key principles for issuing CBDCs.

Kazushige Kamiyama, who heads the BOJ’s payment and settlement systems department overseeing CBDCs, said China may have a “first-mover” advantage on issuing a digital currency.

“But new technology is invented all the time. Even if you’re ahead on the technology available now, you could get locked into what becomes old technology as time passes,” he told Reuters.

As with other central banks, the People’s Bank of China is likely developing a digital yuan mainly for the purpose of creating a stable, efficient settlement system, he added.

“I don’t think a single digital currency will dominate the world, as long as each country makes full efforts to improve its settlement system,” Kamiyama said.

“We’d like to keep tabs on what other central banks are doing and learn from them, not just from China but from other countries,” he said.

Japan has been cautious about moving too quickly on CBDCs given the social disruptions it could cause in a country that has the world’s most cash-loving population.

But China’s progress toward issuing a digital yuan has prompted the government to reconsider and pledge in this year’s policy platform to look more closely at the idea.

The BOJ will begin CBDC) experiments early next year but says it still does not yet have any plans to issue its own digital yen, Finextra reports.